Migrating to SAP Tax & Revenue Management (TRM)

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Migrating to SAP Tax & Revenue Management (TRM)Strategic guidance

eBook

CONTENTS

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INTRODUCTION ..............................................................................................

BENEFITS OF A DIGITAL TAX LANDSCAPE .........................................

AN OMNI-CHANNEL TAX SYSTEM .........................................................

DEBT MANAGEMENT .................................................................................

CASE MANAGEMENT AND ACCOUNTING INTEGRATION ..............

UNDERSTANDING DATA ON SAP S/4HANA .........................................

COLLECTIONS AND DISBURSEMENT ...................................................

INTERFACING AND INTEGRATING ........................................................

OMNI-CHANNEL ACCESSIBILITY ................................................................

HOW IT WORKS ............................................................................................

DEBT RECOVERY SUPPORTED BY RISK MANAGEMENT .........................

DEFINE AND IMPROVE COLLECTION STRATEGIES ................................

REPORTING WITH SAP BUSINESS INTELLIGENCE (BI) ............................

FRAUD DETECTION ......................................................................................

DATA MIGRATION .........................................................................................

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Migrating to SAP Tax & Revenue Management (TRM)

What to expect from this eBook?This eBook will provide an overview of basic guidelines and practical recommendations to help you transition to the SAP Tax & Revenue Management (TRM) platform. The suggestions made are based on our in-depth practical experience with many government and public sector organisations, around the world.


INTRODUCTIONGovernments and public sector organisations are facing unprecedented public demand and challenges to increase their effectiveness and accuracy in an environment of deficits, changing legislation and technology, noncompliance issues, and tax evasion.

As well as tax legislation amendments and business processes around mass interest and penalty calculations, growing needs are being identified to manage and control data to perform successful fraud detection. Tax authorities require technically advanced and scalable solutions as data volumes grow to ensure accuracy across individual deferment arrangement offerings, tax return submissions, delinquency rules based on risk profiles, and special tax assessments due to legislative complexity.

BENEFITS OF A DIGITAL TAX LANDSCAPESAP’s Tax & Revenue Management (TRM) platform enables tax agencies to increase revenue collections and compliance while optimising and extending their internal procedures. To keep pace with change, tax authorities need to automate the entire tax and revenue management life cycle and support multiple revenue or tax types with a single view on the taxpayer’s tax and filing obligations, account situation, relationships and submitted return or refund details.

SAP TRM offers an integrated set of pre-delivered applications and functionalities to provide proven best practices. Take control of high data volumes generated from tax returns and other third-party systems, SAP S/4HANA can quickly consolidate the information to enable real-time fraud detection and reporting to gain instant analytical insights into daily operations. Additionally, forms can be created and used in the context of interactive forms, and online taxpayer services can be provided on-demand.

AN OMNI-CHANNEL TAX SYSTEM Tax authorities and public organisations need to be available through several channels to serve stakeholders in the most effective way. Taxpayers, tax & policy advisors, vendors and businesses have a permanent need to communicate with local, federal or state departments to fulfil their legal obligations. Ministry officials, tax officers, auditors and other responsible stakeholders must be enabled to cater for the legal aspects and regulations of tax and levy processing. Omni-channel flexibility is key to encourage taxpayer compliance and to increase the collection success.

Omni-channel accessibilityModern communication channels allow a more service-oriented approach to the taxpayer community. But conventional methods of communication via phone, emails or face-to-face are also key to ensure a fully taxpayer centric interaction and service.


Therefore, business processes must cover:• taxpayer registration and deregistration• return submissions and amendments• solid accounting and mass payment processing• debt management• auditing• objections• appeals and regular risk assessments• compliance functionalities

These processes must be supported by comprehensive case management features and multi-control workflow processing. Outbound correspondence and certifications must be generated and stored with taxpayer records in a Document Management System (DMS). With generated master data and data quality management needs, more security aspects come into play to comply with updated regulations and legislation.

How it worksThe SAP S/4HANA database allows faster access to multi-dimensional data without sacrificing on performance. This is because data calculations aren’t carried out in the application layer but are moved to the database for in-memory processing. Business processes and functionalities are seamlessly integrated with other software modules or components which are regularly used across a Government Resource Planning (GRP) system.

Additionally, Business Intelligence (BI) and data analysis provide accurate and timely internal and external reports. Primarily, there is a need for fraud detection methods and compliance assurance. Based on SAP S/4HANA in-memory computing, millions of data records can be analysed instantly.

Omni-channels using the Taxpayer Multi-Channel Foundation (MCF) or the SAP Hybris Platform



COLLECTION AND DISBURSEMENT Public Sector Collection and Disbursement (PSCD) is the industry-specific solution of Contract Accounts Receivable and Payable (FICA) addressing the specific public sector needs. Government authorities, federal states, districts and councils are enabled to manage their accounting in terms of receivables and payables, taxes, payments, fees, levies, dunning, correspondence generation and other financial transactions; from and to business partners, constituents, citizens, taxpayers and other public or private entities.

The master data model in PSCD is flexible. Relationships can be created between business partners, taxpayers, tax accountants, and other individuals to document financial or operational business connections between the involved entities, in the system.

PSCD is designed to process mass data and is administrated as an independent sub-ledger, parallel to the General Ledger (G/L) in the Financial Accounting (FI) component. PSCD is a mandatory sub-ledger solution, from a taxpayer accounting perspective, receiving the billing information from TRM and the associated portal frontend respectively, to address specific taxation objects appropriately.

The Collections Management component supports the tax authority to deal with overdue payables by requesting payment or by proposing other deferment arrangements using collection strategies. In addition to Financial Accounting (FI), PSCD is fully integrated with other SAP software components such as Funds Management (PSM-FM), Controlling (CO) and Records Management (RM).

DEBT MANAGEMENT Debt management system functionalities must support appropriate strategies to help a taxpayer or debtor to handle debt more effectively. A more proactive approach might be early debtor engagement, prior to the due dates of individual debt items.

With regular risk profiling updates and tracing debtor payment behaviour, a predictive analysis model can be generated to help segment the debtors in risk categories, such as low, medium or high.

After evaluation, a better understanding of individual preferences and response patterns can be created to assist the debt recovery process more effectively.

Components of a debt management lifecycle

Debt recovery supported by risk management To support an efficient collections or debt recovery process in the SAP TRM system, risk related information must be considered and derived from various business processes, as the interaction with the taxpayer or debtor takes place. This information can be consolidated into an overall risk profile which is based on a numeric system or scoring matrix. For the best approach, follow these risk management methods:

1) Identify Determine the associated risks in the business processes.

2) Measure Categorise identified risks into severity and impact on the tax authority. Score the risk when evaluating the criteria to create a taxpayer risk profile (creditworthiness).

3) Analyse Assess business processes by applying risk categories and drivers into daily operations.

4) Action After creation of the risk profiles, corresponding action can be taken when engaging the taxpayer and any potential risks can be mitigated early on.

5) Monitor Monitoring risk mitigation helps manage the effectiveness of decisions. It also contributes to SAP TRM’s predictive analytics capabilities, enhancing data understanding.

6) Manage Risk analysis procedures must be reassessed and adapted to fine-tune risk identification and measurement to continually support and improve debt recovery procedures.

Define and improve collections strategies With a better understanding of risk and insights into taxpayer and debtor profiles, enhanced collection strategies can be defined and scheduled. Collection strategies can be optimised and improved over time to make collection departments more efficient as they interact with the taxpayer community, adding value to the compliance policies.

The Debt Management life cycle highlights learning capabilities, which can be achieved while capturing outcomes from collection activities:

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Depending on risk assessment rules and collection steps, interactive cases in the integrated Case Management solution can be created, when a specific threshold is reached or exceeded. This feature is driven by business processes and supports tax authorities to manage debt recovery more effectively.

CASE MANAGEMENT AND ACCOUNTING INTEGRATION The SAP Customer Relationship Management (CRM) component provides Case Management, Contact Centre and Campaigning solutions. This enables tax authorities to perform audits, collections cases, tax fraud cases, objections and refunds, and to interact with taxpayers and business partners more efficiently. The functionalities within the CRM system support the business flow and outcomes between tax officers and other departments or third-party organisations:


The associated business processes and pre-delivered functions associated to the accounting in PSCD are integrated with the CRM Interaction Centre Web Client (ICWC) by means of Financial Customer Care (FCC) as part of the following scenarios:

1) Financial Customer Care Solutions This scenario offers functions such as an account overview, the interactive display of the dunning history, dispute of open items, and the search for payments of the taxpayer.

2) Collections Management & Debt Recovery This scenario covers important functions, such as the initiation of taxpayer calls, processing of payments, and the granting of deferrals and deferment arrangements like instalment plans.

UNDERSTANDING DATA ON SAP S/4HANA SAP High-Performance Analytic Appliance (HANA) is based on the concept of in-memory computing and stores all data in-memory, in columnar format and compressed. Everything is calculated on-demand, on the fly, in the main memory.

This helps government organisations to run online transaction processing and allow for any type of real-time, ad hoc queries and data analysis. The following figure depicts the wide range of possibilities by using this powerful tool:

Wide range of in-memory capabilities


Quick to analyse Organisational and Budgeting Data

Efficiently compile complex and voluminous program and policy records and databases.

Rapid access to information from multiple data sources.

Critical analysis to drive optimaltaxpayer services.

Speed-up your Needs - Where it impacts yourTax Authority

Quickly support public safety and security concerns withreal-time decisions.

Forecast and prioritise actions during potential emergencies tomitigate impact through pre-emptive actions.

Greatly reduce fraud and non-compliance through prediction and immediate detection.

Easy to Get, MoreDetailed Data

Real-time, detailed visibility toplanned & actual resource activities across theorganisation, mission, and jurisdiction

Rapidly prioritise activities tailored to other Governmententities and agencies, incl. taxpayer demands.

Leverage social media data sources for public sentimentanalysis.


In contrast, APIs provide organisations with the capability to communicate standardised data sets, from and to any source, in nanoseconds, enabling real-time and bi-directional information sharing. This enables business processes to operate from a single-source-of-truth, so all parties accessing the data have up-to-date records of sales, inventory and other operations.

APIs are significantly easier to setup and manage. This means making changes to application architecture, incorporating new technologies and software solutions can be achieved quickly and at a lower cost.

Reporting with SAP Business Intelligence (BI) SAP BI provides the required tools and functions that enable government entities to enhance their tax system by optimising business processes and by enabling them to meet federal, state and internal reporting requirements. The entities can integrate, transform and consolidate relevant business information from other SAP applications and external data sources. SAP’s BI technology provides a high-performance infrastructure based on S/4HANA that helps evaluate and analyse available data much faster.

Fraud detectionThe SAP Assurance and Compliance (AC) solution, also known as SAP Fraud Management, addresses the requirements for tax fraud detection and investigation on submitted taxpayer information by alerting fraudulent patterns. The benefits are: • Decrease of tax fraud losses through real-time detection • Improvement of operational efficiency by automated and direct business process integration • Improvement of investigator efficiency with real-time analysis and simulations • Maximisation of detection efficiency by early identification and prediction of future risk• Improvement of process efficiency through real-time monitoring and risk profiling

Data migration Data migration is the process of moving master data and transactional data from a legacy system or several databases to new SAP TRM data structures. Data migration typically includes: • Data extraction where the data is read from the legacy systems and placed into a staging area.• Data cleansing and transformation of legacy data into the target system formats and requirements in

the staging area.• Data loading where the data is written to the new system.

Data migration is usually performed in three steps. These steps will be repeated multiple times, for testing and quality assurance purposes.


1) Data extraction Data extraction will include all data entities. This step is repeatable, as data may change in the customer legacy systems during data migration test and verification cycles.

2) Data cleansing and transformation Data cleansing improves the quality, accuracy and integrity of data. The data for transformation must be in sync with the data load templates; this requires accurate data mapping between legacy fields and data fields required in SAP TRM.

3) Data loading and verification After data is loaded into TRM, verifications are required to ensure data is correct and complete. Verification is done by evaluating reports generated in SAP and in the legacy system.

INTERFACING AND INTEGRATIONInterfaces usually affect other Government institutions or third-party service providers, such as financial institutions or government entities. We use tools to facilitate the integration of business processes, to be performed or supported synchronously or asynchronously, via batch or online interfaces on a periodic basis. Diverse integration scenarios are used to model the process flows between the different internal and external systems and data destinations. SAP Process Orchestration (PO) enables the tax authority to exchange data with others and thereby ensure that the value chain of business processes are maintained and secured.

If you want to learn more about technology in the tax and revenue landscape, please reach out to us on [email protected]


Staging area Staging area

3. Data Loading1. Data Extraction 2. Data Cleansing& Transformation

Legacy System(s)Legacy Database(s) .....Customer responsibility .....Implementer

Responsibility

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Migrating to SAP Tax & Revenue Management (TRM)

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