How to Navigate the Changing Tax Regulations Using Technology? Insights From Tax Technologist Expert Santhosh Kumar Lalgudi, a leading global figure in the tax technology industry, says the strategic use of technological tools is the answer to navigating the complexities of modern tax environments

As digitalisation reshapes every aspect of society, the economy faces novel challenges, especially in taxation. While governments and taxing authorities strive to adapt to the digital economy, traditional tax operating models that fail to leverage technology are becoming a thing of the past. This evolution of tax functions calls for innovative tax tech strategies to ensure efficiency while minimising risk in rapidly transforming environments.

The Changing Tax Regulations

The digital era has ushered in new tax regulations, demanding sophisticated technological solutions for compliance and adaptation. Tax authorities and businesses are now focusing on insight-driven, compliance-centric strategies.

The implementation of the OECD/G20 BEPS Project, with its two-pillar reform framework, epitomises these challenges. Pillar One aims to redistribute profits to market jurisdictions. At the same time, Pillar Two introduces rules like the qualified domestic top-up tax (QDMTT), the income inclusion rule (IIR), and the undertaxed profits rule (UTPR), where the Global Anti-Base Erosion Rules (GloBE) necessitating intricate compliance mechanisms.

Santhosh Kumar Lalgudi, a leading global figure in the tax technology industry, says the strategic use of technological tools is the answer to navigating the complexities of modern tax environments.

As Santhosh mentions in his scholarly piece on the Voices forum for Accounting Today, the critical issue facing corporate tax departments is the overwhelming volume and complexity of data that must be processed and analysed driven by regulatory changes and the inherent difficulties of handling diverse data sets in the evolving and increasingly intricate tax regulations.

Leveraging Technology to Overcome Tax Process and Data Challenges

Tech Bullion recently featured an article where Santhosh cites the crucial role of analytics and cloud technologies in automating tax processes, enhancing decision-making, and ensuring tax compliance. The advanced technology leader for EY's Tax Technology and Transformation (TTT) practice illustrates how tax analytics leads to rapid data alignment, establishing a unified and reliable source of tax data and facilitating standardised data transformation.

However, the challenges of establishing such a centralized data source are multifaceted. In a Microsoft.com professional publication, Santhosh acknowledges these complexities, outlining three significant challenges: the difficulty in tracking data origins due to consolidation from multiple sources, often via spreadsheets; the challenge of data preparation by numerous individuals leading to complex consolidation processes; and the limited time left for tax processors to conduct analytics once they attain an aggregated data view.

To tackle these issues, EY teams, under Santhosh's leadership, collaborated with Microsoft to develop a comprehensive, cloud-based solution utilizing Microsoft Azure, Power Platform, and Microsoft 365 technologies. According to Santhosh, this partnership aims to create a more efficient tax environment, combining EY's tax expertise with Microsoft's technological prowess to establish a more competent single source of tax data truth that can be used daily.

Santhosh asserts that integrating Microsoft Azure's capabilities is set to significantly accelerate the efficiency and cohesiveness of data within the team, a true game-changer in tax technology.

He explains, "With Power BI Embedded analytics and data modelling, visual reports can be available to all users via the EY Connected Tax Analytics, which serve as the single version of truth everyone from tax can rely on."

Innovations in technology are revolutionizing the tax function in large corporations, significantly reducing the time and effort required for data processing and analysis, enabling rapid data collation, improving reporting and compliance, transforming months-long processes into weeks or days, and facilitating the completion of work papers with ease.

Santhosh mentions in another Microsoft.com article, "Having powerful business insights and analytics at their fingertips, EY clients are now seeing a 50-90 percent reduction in data transformation activities, which means simplified data connectors and integrated security readily available."

Leading Tax Transformation by Example

From leading EY tax's first blockchain engagement to collaborating with Microsoft, Santhosh's career, spanning over a decade in tax and technology sectors and areas of blockchain, cloud, artificial intelligence, and analytics, showcases his expertise and collaborative approach to serving the tax technology industry.

As a Lean Six Sigma Black Belt, Santhosh expresses that innovation-derived efficiency and collaboration-derived value creation are paramount to serving his clients across the tax tech industry, achieving more with less while remaining data and policy-compliant.