Uncovering Hidden Insights in Your Tax Data

What do you see in the picture above? The image is an autostereogram, a picture with a base pattern repeated across the full image. But there’s a catch. Instead of exactly repeating the pattern throughout the image, an autostereogram shifts select pixels of the pattern each time it repeats itself. When viewers focus their eyes behind the image, the result is an optical illusion that tricks the brain into seeing a three-dimensional figure. In this case, a shark.

Reviewing large amounts of tax data can often be as exhausting and intimidating as staring at an autostereogram. You know the data set has the number you’re looking for or the answer you need. It’s just hard to make it out amid the noise.

If you know how to utilize it, technology can help to quickly find the hidden data or information that can easily get lost among so much other data, enabling companies to see the big picture that had eluded them in the past. 

I saw this firsthand when dealing with like-kind exchanges years ago in my role at PwC. Before we brought technology to our LKE services, companies were limiting like-kind exchanges to planes, trains and real estate. The reason? It would often cost between $5,000 and $50,000 for each transaction.

By bringing technology to our like-kind exchange service for automotive clients, we helped them to dramatically lower the transaction costs. This in turn allowed the deduction to be applied to much lower-cost and higher-volume assets, significantly increasing the overall benefit to the client.

In the same way that utilizing PwC-developed technology increased the value of Like-kind exchanges, technology and analytics can provide huge benefits to tax departments and entire organizations. As technology and computing power continue to improve, the possible applications are nearly endless. Some of the ways that we’re employing technology to enhance tax services include:

Meals & Entertainment (M&E) Studies – M&E studies currently rely on significant manual work by analyzing historical results. Before any tax calculations can be made, an individual must apply state, federal and company rules to each transaction. Then the data must be reviewed to detect trends, uncover insights and highlight outliers that could indicate potential fraud or abuse. Automating these processes will allow us to provide real-time results when data is submitted, significantly increasing adherence to company policy and eliminating classification errors to enhance the benefit.

Benchmarking of KPIs – Every company wants to know how they compare to others in their industry. With tax technology and analytics, organizations can expand Effective Tax Rate (ETR) benchmarking studies to include a multitude of tax Key Performance Indicators (KPI’s) against industry averages. For example, a manufacturing company that learns its use of the R&D credit places it in the fifth percentile among peers will be able to explore the reasons why it’s lagging. With that knowledge, it can explore whether it is investing as much as its peers or not doing enough to capture the credit.

Centralizing Data – Using technology and digital services to create a centralized, trusted source of data specific to the tax function can help reduce or even eliminate much of the spreadsheet manipulation and reconciliation many tax departments now perform manually. Centralized and simplified data also makes it much easier for tax teams to provide meaningful analytics to enterprise leaders.

Perhaps the most exciting aspect of technology is the opportunity to mine data to foster innovation. The use of analytics by tax departments gives companies the ability to build technical tax subject matter expertise into applications that will expose hidden value.

Much like the three-dimensional images hidden in autostereograms, numerous insights are often hidden within the multitude of data held by corporate tax departments, waiting to be uncovered if you can just look at the picture in the right way.