Machine learning and AI are often associated with enhancing the consumer experience, but they can also assist businesses significantly in their tax-related work. Simplifying the taxation processes and compliance procedures contributes to business sustainability, and through it, the wider community and society.
01 September 2021 • 4 min read
The concept of a fair and sustainable society is simple: communities can only function in the present and persist in the future if all their members abide by common rules.
Businesses are not excluded from this social responsibility assignment. Every company has to pay in, first and foremost, by paying taxes that keep communities sustainable. But what sounds quite self-explanatory can be a difficult task for companies, especially with regard to complicated tax systems and non-transparent regulations.
Maximising profits has always been a major goal of almost every company. To make something clear: generally, there is nothing wrong with this agenda.
Paying taxes should not be regarded as a burden but rather as a form of giving back. …Tax money can be regarded as the blood flow that makes communities sustainable.
But this strive for profit maximisation has to be aligned with social values. To prevent harm from the system of society, corporations cannot only focus on their own wellbeing; they need to act responsibly towards society as a whole. Playing by the common rules and paying a fair amount of taxes is an essential contribution.
In today’s business world, this alignment between business goals and ethical principles is known as Corporate Social Responsibility, or CSR.
CSR includes a set of guidelines that businesses need to follow to live up to their duties towards society and allow fair market conditions. Overall, these guidelines cover three main aspects that are essential for the sustainability of society:
First of all, businesses are obligated to organise their production processes in an eco-friendly way. Natural resources have to be used deliberately in order to protect the environment.
Secondly, CSR covers social aspects such as employee rights that have to be respected in order to provide workers with safe and healthy working conditions. Exploitation or other harmful factors that endanger the wellbeing of employees have to be omitted.
And lastly, economic specifications ensure fair market conditions and regulations for business practices within companies. This includes, for instance, penalties for companies that avoid tax payments through evasion attempts, which would give them unfair competitive advantages.
CSR guidelines are specified in the reference documents of several international organisations. Examples are the declaration of principles by the International Labour Organization (ILO), which focuses on social justice and employment laws; the OECD guidelines for multinational corporations, which regulates market-based conditions of the business sector; and the guiding principles for the economy and human rights of the UN.
All these guidelines have a common agenda: to ensure the stability of society overall, i.e. to provide sustainability. Therefore, companies all over the globe are compelled to adopt these principles in their strategy and business practices.
Let’s be realistic. Not every company is thrilled to fulfil its social responsibility assignment by paying taxes. It’s part of the DNA of corporations to lower their expenses, which guarantees a high cash flow and future-proofs financial planning.
However, paying taxes should not be regarded as a burden but rather as a form of giving back. Every company benefits from the conditions of the city and country in which it is situated. The usage of the local infrastructure and local resources are just two examples to illustrate this notion.
Tax money can be regarded as the blood flow that makes communities sustainable. But even if companies are willing to pay their fair share of taxes, that’s sometimes easier said than done.
Tax systems often lack transparency. In Brazil, for instance, there are three governmental institutions that all collect taxes: corporations are obliged to pay taxes on a federal, state and city level for every sale and receipt of goods and services. The country of Brazil is subdivided into 26 states, the Federal District, and more than 5,500 cities, which all have specific tax rates and different tax reporting requirements. This alone indicates how complex the Brazilian tax system is.
If parts of the system collapse, it is only a matter of time until the whole system becomes unstable.
Moreover, up to five different taxes are incurred for each selling process, and businesses need to send electronic documentation to several different governmental institutions.
What’s more, tax laws and compliance regulations often change, which increases the complexity of the Brazilian tax system even further.
Companies constantly need to stay informed about the latest developments regarding the tax system and fulfil all the tax-related requirements. Otherwise, they risk committing tax evasion – even if there is no intention to defraud. Understandably, this is a challenging endeavour, especially for smaller businesses with limited financial budgets.
The avoidance of tax frauds (intentional or otherwise) is not only essential for the sustainability of companies but also for society in general. If parts of the system collapse, it is only a matter of time until the whole system becomes unstable.
To ensure sustainability, corporations have to practice effective risk management, or more precisely, risk reduction. In terms of taxes, organisations need to gain an overview on current tax laws and compliance regulations. And, of course, pay arising taxes to their full extent.
“Regulations quickly change, bringing not only new legal requirements, but also opportunities to leverage new scenarios, tax incentives and technologies. Businesses with a consistent integration of processes, technologies, development infrastructure and partners are much better positioned to grab these opportunities.
Risk reduction requires a significant effort, of course, but technological innovations can assist businesses significantly in their tax-related work. Technologies such as AI, machine learning, robotic process automation or big data analytics help companies stay up to date in terms of tax regulations and optimise the declaration processes. Furthermore, most of these processes are completely automated. As a result, incorporating these solutions helps to simplify taxation processes and compliance procedures, which contributes to the sustainability of businesses and, consequently, the wider community and society.
Regulations quickly change, bringing not only new legal requirements but also opportunities to leverage new scenarios, tax incentives and technologies. Businesses with a consistent integration of processes, technologies, development infrastructure and partners are much better positioned to grab these opportunities before their competitors.
Providing society with a state of sustainability is only possible if companies meet their duty of acting responsibly. Paying taxes and sticking to the compliance regulations of the market is an act of solidarity that all competitors need to take seriously.
Companies that ignore this agenda by evading taxes, however, do not only cause harm to the market by violating the rules of competition: they harm society itself.
Paying taxes is an essential part of the sustainability equation, and technology provides crucial support. Making the world a better place is possible only if every company leads by example.
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