News & Insights

Lessons from the 2023 Tax Season – Looking back to move forward

Robin Silverthorne
Wed, 08 Nov, 2023

Robin Silverthorne, Global Tax Services Director at IDR gives his thoughts on staying sane before, during and after FATCA reporting season. 

Ah, Q4 2023! For global FATCA/CRS reporting teams, this is the point in time where the peaks of last year’s return submissions and next year’s efforts seem equidistant.  It’s therefore an ideal time to both reflect on how this year went and look ahead to the next cycle. 

What have we learned in 2023?

The great philosopher Mike Tyson once said, ‘everyone has a plan until they get punched in the face’. FATCA reporting functions meticulously plan to prepare, validate and submit eye-watering stacks of customer data to tax authorities. Yet, invariably, each year those plans receive the proverbial punch in the face when tax authorities release new or amended guidance, or other external influences manifest, giving minimal time to adapt.

2023 seemed no exception.  In the Private Markets space finalization of NAV calculations later than March, FATCA classification of new structures, along with the reconciliation of transfers are just some examples that can potentially cause delays close to filing time. These are critical to factor into planning.

How can we flex during the unexpected without paralysis?

Do your planning now…. Prepare for both the known and unknown by ensuring you have the right processes and technology provisions in place for super-agility during what is always a tremendously busy, resource and data-intensive season for tax teams around the globe. Some important considerations include:  

  • What data control reports and mitigation plans do you currently maintain?
  • How are they reconciled?
  • What governance do you have in place to make critical decisions at late notice in the reporting season?

Data, Data, DATA

A wise owl once said to me, “Operational Tax isn’t Tax: it has operational in the title” (the facepalm emoji wasn’t around at the time, so I stayed mute). However, within that point lies the real challenge for Operational Tax professionals: managing FATCA/CRS and other customer reporting obligations is essentially one of managing large volumes of data, and the risks this entails.

The Automatic Exchange of Information rules, for example, coalesce around customer data risk, operational process, and complex functionality. To achieve this, in an environment where tax and data risks are increasingly reaching board level, clarity is key; which means quick access to clean, single-sourced and verified data.

This coming year (the tenth cycle of FATCA reporting) it remains vital that we make good, clear and often fast decisions in relation to customer, investor and client data in tight regulatory-driven timeframes. In a Private Markets context, some simple steps can be taken, such as ensuring early classification of new structures, and clarification of investor data.

How best can we manage and make these complex decisions in an environment where operational tax professionals are more stretched than ever before?  

For what will be my tenth FATCA reporting season, I could reiterate the well-trodden advice of ‘have good governance over your data’ and ‘ensure you have good data and analytics in place’. However, some (or maybe many) of you may be reporting with legacy infrastructures, established (or prescribed) governance frameworks, and a data validation process that has evolved with many tactical solutions over time. 

Leveraging technology to help you see the wood for the trees

A decade post FATCA, there are ever-increasing data reporting obligations to tax authorities (CESOP, CARF, DAC, and CRS enhancements to name just a few).  However, whilst the challenges associated with reporting accurately and on time remain, the tools at our disposal have moved forward. Given the scale of technological development over the past ten years (when some of us were poring over IRS 2010-60) and the increasing pressure on our operational resource, we need to look at how we can leverage technology to work smarter. Not harder.  

Now, between cycles, is an opportune time to re-evaluate your longer-term tax data management strategy. Financial penalties and client data management risks are only increasing, and need mitigating, so get your resource geared up for the challenges and surprises that lie ahead in 2024.

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