The Utter Digital Transformation Of Operational Tax Compliance

During the past 10 years, the banking and asset management sectors have gone through a restructuring phase, following the 2008 financial crisis which prompted major banking groups to redefine their strategies. As is well known, a huge increase in regulatory and tax compliance obligations followed the crisis, affecting banks and investment managers heavily.

In the same period, however—and not at all accidentally—the digital transformation reached a new stage of maturity, enabling new efficiencies and creating new channels to the market. Historically, tax practices and tax reporting in particular have been low-tech and paper-based, but no longer: digitalised operational tax compliance has seen to that. "Operational tax" broadly covers withholding tax (WHT), transactional taxes, and compliance obligations (due diligence and tax/investor reporting). Compliance officers today can now rely on regtech products and services, which come generally in three varieties:

Quantitative regtechs, which are built to handle huge data sets. They are useful, for instance, for fulfilling periodic reporting obligations regarding investors or account holders. Process-centric regtechs, which improve or redefine a particular process. They can, for example, enhance client on-boarding processes, or solidify internal controls or governance frameworks. Pure regulatory regtechs, which focus on identifying new regulations and monitoring changes. As regulations thicken and existing regulations quicken, such automated tracking systems are essential. As outlined in my last article, many large banking institutions have adopted IT...