Tax Software Development in a Multi-Jurisdictional Environment

1. Tax Software Development in a Multi-Jurisdictional Environment John Glaubitz, Vertex Chair, OASIS TaxXML Business Analysis Subcommittee john.glaubitz@vertexinc.com 13th XBRL International Conference

2. Agenda • Tax Compliance • Information Exchange in Compliance • The Role of Tax Software Solutions • Issues and Challenges • Standardization and Semantic Interoperability • Benefits • Approach 13th XBRL International Conference

3. Tax Compliance Processes 13th XBRL International Conference

4. Cost of Tax Compliance • Costs result from gathering, manipulating, registration, retention and provision of information. • Consequences to business and government for untimely or incorrect tax returns. • Complexity of meeting compliance obligations may require the help of tax specialists or intermediaries • Cost and complexity of compliance can be a barrier for businesses to enter the market • Costs of compliance can raise the price of products. 13th XBRL International Conference

5. Information Exchange to Support Tax Compliance Processes Tax compliance involves exchanges of information to facilitate each of the processes that may be B2B(C), B(C)2G, G2B(C) or G2G 13th XBRL International Conference

6. Tax Compliance Process Example Tax Registration Process 13th XBRL International Conference

7. Communication through Messages • Business processes are facilitated by information communicated through messages • Common processes can utilize common discrete messages. • Communication relies on agreement of meaning and content between parties 13th XBRL International Conference

8. Software Solution Within Tax Compliance A software developer needs to provide solutions for many potential combinations of businesses and taxing jurisdictions 13th XBRL International Conference

9. Diversity in Tax Software Combinations become more diverse with the inclusion of multiple ERP’s used by businesses across multiple tax types. 13th XBRL International Conference

10. Role of Software Solution in Tax Compliance • Deliver functionality to facilitate business processes • Buffer the Customer from complexity • Assume the burden of dealing with diversity • Handle impact of new Technology, Security requirements and Compliance requirements • Minimize total cost of Compliance 13th XBRL International Conference

11. Software Solution Challenges • Provide a tax compliance solution that: • Minimizes Ambiguity • Enables Tracability • Enforces Security • Provides Completeness of Requirement • Is Adaptable to new requirements • Is Cost Effective • Handle the diversity of terminology and meaning across the various Jurisdictions, ERP’s, Business Verticals, Tax Types and Tax processes. 13th XBRL International Conference

12. Semantic Interoperability • Equal terms may have different meanings within different regulations • Different terms may have the same meaning. • For efficient exchange of information it is necessary to agree upon the syntax and semantics (meaning) of terms • There is a penalty for misinterpretation • Challenge is to standardise in a manner that both allows compliance within existing regulation and adheres as much as possible to the existing business processes. 13th XBRL International Conference

13. Semantic Layers 13th XBRL International Conference

14. Taxonomy • A system for naming and organizing terms into groups that share similar characteristics • Used as a classification method, typically a hierarchy, and provide some meaning imbedded in the structure • Clear definition of the meaning of terms used and the relation between terms 13th XBRL International Conference

15. Netherlands Taxonomy Project Architecture 13th XBRL International Conference

16. Common Interfaces 13th XBRL International Conference

17. Benefit to Software • Greater Consistency • Less Complexity • Externalize Interface Development • Focus on Core Functionality • More Efficient & Accurate Information Interchange • Filings & Reporting • Research Documents • Leveraged Development • Calculations • Processing • Software Interoperability • ERP and Financial Systems Integration • Government Systems Integration 13th XBRL International Conference

18. Benefit to Business and Government • Timeliness • Accuracy • Efficiency (lower cost ) • Ease of entry in Compliance • Consistency of multiple reporting • More opportunity for re-use of data • Better relationship between Business and Government 13th XBRL International Conference

19. Reduction of the Cost of Compliance • Business • Reduce possibility of penalties or fines • Reduce reliance on Tax Specialists and Intermediaries • Reduce barriers to entering the market • Government • Reduce errors from inconsistency of reporting and re-entry • Reduce late filing or non-compliance • Software Development • Reduce diversity of interfaces • Reduce inconsistency of data semantics 13th XBRL International Conference

20. Getting There • Collaboration • Parties with overlapping information requirements • Evolving standards with overlapping coverage • Adoption • Understanding of options and coverage • Involvement in the process 13th XBRL International Conference

21. OASIS TaxXML Approach • International resource of tax knowledge comprised of representatives from Government, Business and software development • Look to evaluate, influence, specify and recommend XML specifications and standards as they relate to the processes and information exchanges involved in tax compliance. • Reliance on incorporating XML standards already defined for the common business vocabulary. • The benefits sought by The Committee include reductions in development of jurisdictionally specific interchange standards for software developers and tax administrations. 13th XBRL International Conference

22. Impact on Software Developers • Continuous involvement in the Standards Process to be aware of business and technical directions and to provide perspective and requirements of software development to the evolution of standards. • Acceptance of adopted standards and ability to deliver solutions using available standards • Change the paradigm from design, build and control proprietary interfaces to incorporation and internal management of open standards. 13th XBRL International Conference

23. Questions john.glaubitz@vertexinc.com 13th XBRL International Conference