COVID-19 has completely changed the game for business—and no matter how much many industries may want things to go back to the way they were, current business trends don’t show that as being likely.
Just in the last few weeks, reports have come about top companies such as Amazon and PwC embracing a permanent work from home/anywhere policy, joining the likes of Microsoft, Twitter, Spotify, and many others. Remote work is here to stay—and just as the pandemic accelerated this practice, a permanently distributed workforce will hasten other disruptive trends.
Now is the time for businesses to adapt to these new realities and lead the charge on revised strategies, lest they risk falling off the board entirely.
Work Anywhere, Manage Everywhere
The gig economy has firmly taken root over the past decade but will expand ever more quickly as companies and employees alike fully grasp the implications of a permanent remote option. Decision makers are swiftly realizing that they can allocate funds to secure the best talent from anywhere in the world while saving money on needless things such as centralized corporate headquarters staffed by exclusively local talent.
In a few more years, it may not be unusual for many companies to have the majority of their employees out of state, making compliance with tax law exponentially more complex. Local regulations at every step of any transaction will need to be considered, potentially further complicated by value-added tax at any point of the process. The new face of business travel, which—despite major changes—may still include business trips and related expenses, will raise questions of taxable fringe benefits as they relate to any number of employee destinations. Additionally, they will likely come to be viewed as a “hybrid work and travel expense,” rather than today’s more rigid business trips.
As these processes continue to grow, both in number of employees and overall complexity, governments will increase scrutiny to ensure the tax gap doesn’t balloon. Amid a mad scramble for compliance, businesses are vulnerable to potentially leaving behind thousands of dollars more than before when remitting taxes. This may sound overwhelming, but savvy business owners will see it as a chance to position themselves well ahead of the competition by adapting early.
Cut Through the Chaos Using Reliable Data
While tax compliance is already becoming significantly more complicated than in the past, tools already exist to simplify the process more than ever. Artificial intelligence has emerged as a means of collecting, validating and enriching data so businesses can stay compliant.
Consider this: when consumers make transactions, they see only that one step—a sale price and a date. For them, this is completely fine. But on the business side, this basic information isn’t nearly enough. Businesses need to see every transaction in its full context so value-added tax, taxable employee benefits, national, state and local regulations and much more can be properly addressed and recorded.
This concept applies to consumer-style spending and employee-driven spending, in back offices and anywhere business is done in this ever-more distributed world. The rapid evolution, digitalization and globalization of business has outstripped the ability of traditional operations to properly contextualize it all. It’s more than most CFOs can track on their own.
That’s where today’s tax technology and data-driven approaches are helpful. The consumer revolution that redefined business as we know it was powered by data; it makes sense to take that power and turn it towards solving the data crisis businesses face today.
By automating the capture of data at every step of every transaction in any corner of the world, CFOs can see the full picture clearly and rest easy knowing this stressful and complicated aspect of the operation is handled. With compliance assured and finances optimized, businesses free up time to focus on growth rather than exhausting resources to stay out of trouble. Similarly, advisory firms will be able to reallocate resources away from tedious data capture and into the much-needed advisory work.
Whether we want to admit it or not, our business culture has changed for good. The companies that roll with the punches at this critical juncture are the ones that will enjoy the best positions once the dust settles.
The Growing Cost of Noncompliance
Companies that don’t strive for the carrot by being proactive about shaping up their compliance practices may find themselves facing the stick as scrutiny increases in the coming years.
While the pandemic has had clear and demonstrable effects on how business is conducted, it also sent unrelenting waves of disruption crashing into tax remittance. The tax gap—projected by the U.S. Department of the Treasury to be $630 billion in 2019, ahead of COVID-19—stands to grow even wider due to simple negligence born of the jump to increasingly distributed and digital workflows.
In many of these cases, businesses are simply unaware of the minutia involved in crossing any additional state lines they’ve recently spilled over—an extremely common occurrence since the rise of remote work. The ruling in 2018’s South Dakota v. Wayfair had already greatly complicated compliance in these scenarios for consumer purchases, but now companies also have to keep track of taxable employee benefits and other purchases that skip over many different jurisdictions far away from headquarters.
It’s important to note that government agencies are also growing more digital and embracing data and automation for their own work. The shroud that has, until recently, veiled indiscretions from penalties is quickly evaporating, and accountants need to react accordingly.
Those who work in accounting are now faced with an ultimatum: proactively adopt new techniques and technologies to get ahead—or face the wrath of audits and penalties as governments step up efforts to regain lost ground.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Isaac Saft is the founder and CEO of Blue dot. Prior to Blue dot, Isaac was the founder and Chief Executive Officer of KCS, a company providing an innovative solution for internal audit and SOX risk management and FDA compliance. Saft holds a Bachelor’s Degree in Applied Science in Mathematics and Computer Science from Bar-Ilan University, Tel Aviv.
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