Tax CMS Software—Low-Cost Enterprise Grade Solution Proposed by uCloudify

Digital Tax CMS Solution by uCloudify—Saving Costs Twice

The complexity of the legal environment has been increasing in recent years, pushing the cost of compliance above expectations. Especially small businesses struggle to comply, as they don’t have any budget dedicated to studying new legal regulations or drafting new corporate guidelines. Many enterprises already made an early decision to save money by digitalizing their compliance processes. This however requires an initial investment into software licenses, which makes sense only on a greater scale.

The uCloudify project works to the benefit of small businesses and came up with a proposition to utilize a free open-source software core to boost the risk management tools kit of companies, who cannot afford it otherwise; hence they can save money twice: (a) by employing digital technology and (b) by using free software license. In this article, we take a look at whether this technology could be used also for Tax CMS using the Austrian regulations as an example.

Note that there are still some costs for deployment, hosting, and ensuring security.
You can find the blog post by uCloudify -> here.

Why Tax CMS?—the New Defence Against Criminal Sanctions

The Tax Compliance Management Systems gained legal relevance in Austria with the ratification of tax amendments in 2018. Based on the parallel with Germany that had had the concept of Tax CMS reducing the legal charges and the direct personal liability for some time, the Tax CMS was expected to provide similar shielding to the executive management in Austria. Soon enough, the court decision confirmed, that proper implementation of internal control system by principle eliminates the claim of negligence by the company’s executives. As an example the decision of the Austrian Federal Court of Finance RV/7102618/2018 from Feb 28th, 2019 can be named (link).

Most big-sized corporations started implementing their own tax compliance system as an integrated part of their risk management software. This was mostly easy to do since they already had had a complete risk management system in place—e.g. to comply with the Sarbanes–Oxley Act (SOX) in the case of Austrian subsidiaries with listing on the US exchange. Small and medium-sized companies on the other side mostly weren’t able to utilize this legal shield due to high initial costs.

Crafting Tax CMS in 3 Steps

Interestingly, the task of crafting a tax risk and compliance system can be highly standardized. The reason is quite simple: the activities and deliverables of the tax department are defined by the law and are for most parts the same for every business. This also means that the implementation cost for small businesses does not need to be particularly high. The following three steps outline a simple approach for crafting a new Tax CMS using the uCloudify’s proposed software solution:

Step 1: The Tax Risk Catalogue and Risk Assessment

Most tax attorneys have created their own templates and risk catalogues. They are typically a prized possession they would never be willing to part with. This catalogue should contain all potential tax risks for your industry and it is a starting point for the Tax CMS setup. It is not wise to try to create one without a tax expert, as it can jeopardize all efforts in the step 2 and 3. Once you have such a catalogue, you can import it into the risk system on your own server.

Would you like to know more about potential catalogue sources?
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Once you have assembled the list of all potential risks, you need to pick the ones relevant to your business and rate them in terms of likelihood and impact using unbiased and clear criteria. This will provide you with the level of potential risk your organization is facing.

Step 2: Documenting the Process and Designing Controls

Once the relevant risks have been identified, it’s time to document the processes and strategically place controls to prevent risks from realizing. Since the financial systems are by principle digitalized, dataflow diagrams might be the most suitable. This is a simple example describing the process of the monthly VAT return preparation:

Step 3: Calculating the Remaining Risks

Once the controls have been placed to cover the identified risks, it’s time to calculate their efficiency. This should be again done using unbiased methods. If the controls are not sufficient and the residual risk is still high (or medium) additional controls and measures are needed. This is a simple example of two simple controls designed for the monthly VAT returns:

Conclusion

Parallel to the German legislation, Tax CMS can reduce the legal charges and the direct personal liability in Austria. Such a system is however mostly not attainable for small and medium-sized businesses due to high initial costs. The uCloudify project may have come up with a suitable low-cost solution to cover the needs of small businesses. The tax risk and compliance system setup can be set up in three steps outlined in this article, using the technology proposed by uCloudify.

Please note that this article is illustrative and cannot provide all specifics regarding this topic. Your case may differ. We always recommend consulting an experienced specialist before making decisions.

Further reading…

  •  International Organization for Standardization, Risk Management Guidelines, ISO 31000—link
  •  Austrian Chamber of Tax Advisers and Financial Auditors, Guideline on Tax CMS Assessments, KFS/PE 29—link
  • Austrian Federal Court of Finance, Decision from Feb 28th, 2019, RV/7102618/2018—link

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