The Cost of Motor Fuel Tax Non-Compliance

By Steve Smith and Matt Zeise, IGEN

Responsible organizations understand that compliance with regulatory requirements plays a vital role in daily operations. Meeting regulatory obligations is expected by customers and shareholders and failing to meet that expectation can wreak havoc on an organization’s reputation and finances.

Today’s business professional relies on technology to provide the data that guides meeting regulatory needs. Technology is needed to ensure that a firm’s motor fuel tax filing obligation is completed in a timely and accurate fashion. With so much riding on technology, how can today’s motor fuel tax professional navigate and evaluate the options available and understand what will make the most impact on their business?

Why Now? The Impact of a Data-Driven Culture

With data analytics now at the center of 21^st century business, the reporting requirements and business opportunities are changing for today’s motor fuel business.

• Transparent View of Compliance: Tax authorities are aware of the amount of data being tracked by organizations and are now requesting data reports to be part of the fuel tax reporting obligation. Organizations that do not automate their tax obligation needs are at a disadvantage as more filing entities move to a digital-only reporting structure.
• Stronger Audit Defense: Organizations are moving to a data-driven model to prepare for internal and external audits. By having a data trail, it is easier to show how reports are generated and numbers are calculated for compliance reporting.
• Discovery of New Business Trends and Issues: A consolidated tax compliance data source can alert decision makers to trends and anomalies within a product line (for example, a decline in diesel tax payments in a specific market). Data provides a way to see these trends and better prepare an organization to address them.

What to Look for In a Tax Automation Tool

There are many excise tax automation tools on the market. However, not all are created equal. Here are a few points to consider when evaluating a tax automation solution.

• Ease of Implementation: Examine what is needed to bring the system into your organization. Will you need IT resources? Will you need to install or “bolt on” software to your current back office system? Does the vendor supply a descriptive timeline about your specific implementation?
• Product Support: A great way to evaluate a company’s support team is to look for product reviews and social media mentions about the tool. Also, investigate if the company addresses their support process on their website. Do they have a guaranteed response time? Do they provide help tools like videos and documentation within the application?
• Depth of Coverage: Because of the vast number of excise filings available, ensure that the solution addresses the jurisdictions in which you need to file.
• Scalability: As a company changes, whether it is through growth or acquisition, can the solution change with it? Look for solutions that can handle multiple data sets from various back office systems.

Challenges and Misconceptions about Moving to an Automated Tax Compliance Model

Though there are many advantages to moving to a digital compliance model, many organizations struggle to get such an initiative in flight.

•  Challenge: Creating a Sense of Urgency with Leadership. Tax departments are often seen as a cost center rather than a department that can realize cost savings. The pain in the manual process is felt at the department level, so it can be a challenge to emphasize how a new approach can benefit the organization beyond time savings.
• Challenge: Understanding ROI. Tax compliance solutions are designed to improve compliance. You may see a temporary increase in time and effort as compliance teams learn a new software tool. Organizations that make the investment in an automated solution often realize increases in ROI and other efficiencies as a result of the transition. The right tool allows tax teams to focus on other tasks by reducing the amount of time searching for inaccuracies. After implementation, companies often see fewer fines and penalties due to delays and inaccuracies.
• Myth: Tax compliance solutions can only handle data from one source. Nope, a reliant tax compliance system can take data from multiple back office systems and translate it into one concise compliance report. If the core data within the system is correct, a good compliance solution will be able to automate and translate the compliance result.
• Myth: I shouldn’t pursue an automated fuel tax solution if I have other IT needs. The right tax compliance system can be implemented regardless of other IT needs and can help with the testing of the new implementation.

How to Approach Your CFO About an Automated Tax Solution

One of the most challenging aspects of moving to a digital tax compliance solution is getting buy-in from leadership. Here are a few tips about how to design your pitch for a positive outcome.

• Know the Problem: Be able to answer these questions—What problems will an automated tax compliance solution address? How big is the issue and why should people care about it?
• Link the Request to a Strategic Goal: Being able to link an initiative to a business goal helps elevate its potential to be approved.
• Identify the Decision Makers: Who will impact if the initiative will be approved or halted?
• Identify an Executive Sponsor: Who at an executive level can help push the initiative? Generally, this individual will take final ownership of the project’s success or failure.
• Expose the Proposal to Outside Criticism and Review It: People are more engaged with a project if they can provide opinion and input.
• Think About Timing: When you present a proposal for an automated tax solution can influence if it will be approved. Look for opportunities to tie the project with other initiatives within the organization. Will the company go through a new enterprise resource planning (ERP) implementation soon? Tying tax automation to another software infrastructure project can help boost its success.

The volume of information required continues to trend upward, and that’s not likely to change any time soon. If your business is also growing across jurisdictions, the compliance tasks can seem like they are increasing exponentially but you can’t afford to drop the ball—the costs are simply too high. Manual processes aren’t enough to ensure the integrity of your data and reporting processes, especially as electronic filing requirements become more and more popular in the industry. Choosing the right automation tool and getting it in place before your organization reaches critical mass can save so much more than just time and effort.

Steve Smith is the Chief Architect, and Matt Zeise, Product Owner at IGEN. IGEN provides data automation and translation solutions with a focus on motor fuel tax compliance and reconciliation of large data sources. Through its suite of solutions, users can automate difficult business tasks and create repeatable workflow processes thereby increasing accuracy while lowering associated time constraints and work hours. To learn more about IGEN, visit www.igentax.com.