Without question, 2020 has been a year of unparalleled turmoil in modern times. The pace of change and the need to keep people safe has forced a move to government intervention to ensure the safekeeping of their populations and their wealth.
But, for those of us who want to change and improve the life of work – like the entire Alteryx Community – the enforced transition for established businesses to cloud-based Software as a Service and automation is potentially the greatest opportunity of our lives.
The dramatic adoption of platforms such as Microsoft Office 365, Zoom, Amazon Web Services, Azure, Workday, and hosted desktops like Citrix with e-signatures has brought a new level of scale and agility to all businesses and employees.
It has also hastened the pace of globalization, and that brings its own challenges for governments around the globe.
What do You Have to Lose?
In 2018, I was invited to speak at a Chartered Institute of Personnel and Development conference on automation and artificial intelligence (AI). My talk was titled “The Future of Work – You have nothing to lose but your chains”, which garnered the following response from another speaker: “…other than your livelihood, family, home, and purpose!”
I demonstrated what was already possible with Alteryx, automated Machine Learning (ML), and Robotic Process Automation (RPA), and I have to say that the news that it’s already here, not some potential future state, was surprisingly unwelcome!
Recently, I revisited the topic for a talk to an HR Leaders Forum, and I was tempted to scoff at some of the outlandish predictions:
- “Companies have to race to build AI or they will be made uncompetitive. Essentially, if your competitor is racing to build AI, they will crush you.” (Elon Musk)
- “By 2020, AI-driven companies to take $1.2 trillion from competitors.” (Forrester)
- “AI to remove 1.8 million jobs but add 2.1 million jobs.” (Gartner)
- “By 2021 AI to reclaim 6.2 billion hours in productivity.” (Gartner)
As a single AI-driven example, Tesla’s brand value is now estimated by Statista at $11 billion — exceeded only by BMW, Mercedes Benz, and Toyota — and gaining fast. Given that Tesla’s build quality is significantly lower than many of the companies it has overtaken, this is extraordinary – Tesla is a data/AI software company that happens to make cars, leading to continuous improvement rather than the traditional new model release schedule. This disruption is coming to every industry.
When you add the growth of Google, Facebook, Amazon, Apple, SpaceX Starlink, Airbnb, Uber, etc., the aforementioned $1.2 trillion prediction from Forrester no longer seems so outlandish.
However, these organizations are effectively stateless so they are able to move income around international finance centers to minimize their local tax liability.
Regulatory Impact
Governments are scrambling to ensure that tax law and revenue collection keep up with this pace of change, and this process will undoubtedly follow a similar path to the growth in international tax reporting for individuals’ and companies’ financial assets and income.
The path began with the U.S. Foreign Account Tax Compliance Act (FATCA) reporting standard introduced in 2014 whereby foreign financial institutions are required to report the assets and income of U.S.-connected citizens and companies to the IRS to ensure that taxes due were not being avoided. This was followed up in 2017 by the OECD’s Common Reporting Standard (CRS) reporting for 51 countries’ citizens, including the remainder of the G20.
If you hold assets in an international jurisdiction, you’ll be well aware of this since you will have either provided proof of identity to the financial institution or your account should be closed.
There are significant fines for non-compliance by institutions, and in 2020, following pressure on tax transparency, international financial centers are starting to increase their level of scrutiny, cross referencing submissions across years and with other regulatory reporting.
This has prompted tax authorities to retrospectively reject previous submissions due to data quality and inconsistencies, leading to significant rework, potential fines, and the threat of tax and regulatory audits.
Most organizations hold their client data and documentation across a mix of systems arising from organic growth and acquisition. Their clients’ data is held across these systems, and translating and combining potentially contradictory reporting in a reliable and provable process is extremely difficult, and becoming even harder.
Both FATCA and CRS are reported by means of XML schema that is becoming more and more onerous each year. To note: Due to COVID, the 2019 reporting deadline was extended to September 30, 2020. This year, however, the 2020 reporting is due by the end of June 2021.
From my experience, Alteryx plays a valuable role in allowing companies to:
- Repeatably validate client static data and provide exception lists so that organizations can keep core systems consistent and up-to-date.
- Add agility to the always-changing set of client data that must be reported.
- Automate to make the remediation process more than a once-a-year manual task, providing many additional benefits to the business from having an accepted set of client data.
- Eliminate some of the load from already overworked IT teams.
- Generate a standard format for uploading to specialized CRS/FATCA reporting platforms.
- Reconcile prior years’ XML reports to provide lists of new/changed/lost clients for the business to verify.
Let’s Chat
I was delighted to be asked by Karen Hays, Senior Solutions Marketing Manager for Financial Services at Alteryx, to participate in a series of Fireside Chats exploring the growth of international tax reporting and how Alteryx helps our clients repeatably meet their obligations whilst driving up data quality for the benefit of their whole organization.
Karen and I have had more years’ experience in regulated finance than we would like to think about, so we were able to keep the conversations short, entertaining, and hopefully an informative introduction to what will undoubtedly be one of the major global themes of the 2020s.
Take a look at our first episode here: