Re: [tax] Tax XML Suggested Direction

[John.Glaubitz@vertexinc.com]

Some good dialog has started around the Tax XML direction and some good
points raised.  Andy's assertion that we need to answer "why" to any of the
initiatives we pursue will certainly be a critical aspect of our analysis
and prioritization.  In addition, Andy summed up well some of our thoughts
on what we may need to deliver when he said, "our job may simply be to
apply the domain-specific expertise to extend a set of business-oriented
standards into the taxation domain" (although "simply" may be an
overstatement).  To accomplish this end will still need some rigor and
organization and the staged approach proposed by Rod (or was it Bruce)
seems well thought out and articulated to meet that purpose. It should
provide a good framework for us to organize our efforts.

To continue the discussion, we thought we might focus on the business
context of one area of tax compliance as an example to identify how we
might approach it and to determine whether a Tax XML standard may provide
value.  Since Andy identified tax registration as an example of a process
that may not benefit from standardization it may be a good choice to
dissect for this purpose.

To begin with, we would need to agree on what is the business purpose of
tax registration.  Let's say simply that it provides the information about
a party required by a tax authority to grant certification or rights to
that party to collect taxes within that authority's jurisdiction and to
provide information back to the party to take advantage of those rights (we
could argue whether this is a good definition, but it suits the purpose of
the example).

From this we could look at the nature of the information that is exchanged.
This may best be done with some formal modeling but simply listed this
could break down into:
·     Who is registering ? what information identifies the party that is
registering such as name, address, phone, other party and contact
information?
·     What is the purpose of this registration ? what information
identifies that the registration is to secure the right to sell goods,
provide services, collect VAT, etc.
·     What authority is the registration with ? what information identifies
the authority(ies) to register, process, procedures and forms?
·     What additional information needs to be provided to facilitate
registration ? type of party (person or business), business type (for
profit, non-profit), marital status, citizenship, place(s) of business,
etc?
·     What information will be returned as a conformation or rejection of
the registration request ? identifier(s), time period for which the
registration is valid, entitlements and obligations, etc.?

Much of this information, such as names, addresses, time periods, etc. have
been the subject of other standards efforts that may be re-used for
processing tax registration.  Since the basic information requirements for
tax registration are consistent, a common template for this information
could be derived.  As well, registration as a more generic concept has been
looked at by some other initiatives and may apply to our more specific need
for tax registration.  However, the specific context for the use of this
information, such as the jurisdiction and tax type involved, will introduce
variation into the assembly of the information components for that context.
This is where it gets interesting and the committee will need to decide how
to facilitate context.  There is work under way in some other standards
groups and technical committees, for example CAM, to begin to address this
question (it's not unique to taxes).

Standardization and/or centralization of the registration process will
simplify information transformation, dispersal, and consumption, but is
there enough value to warrant an effort at standardization?   The answer to
this may vary according to the perspective of the registration
participants:
·     Taxpayers
·     Governments
·     Solution Providers
·     Etc.

Some  possible areas to look at to determine how this will be beneficial to
our organizations may be:
·     Overhead of manual processing
·     Information validation and cleansing
·     Timeliness and higher throughput requirements
·     Process automation for third-party providers
As  suggested in the staged approach, the synthesis of the committee member
input  will  help  to  articulate where value could be derived and identify
opportunities and priorities.

For  our  part,  as  a  tax solution provider, the value for Vertex is that
standardization  in any area of tax compliance, including tax registration,
will  allow  us  to  develop  solutions  more quickly, efficiently and cost
effectively  for government and private sector customers. A common standard
will  increase  the confidence that the information provided by and through
the  software  is  accurate  and consistent. Many of Vertex's customers and
partners  are  international  corporations  that  do  business  in multiple
jurisdictions, span across multiple tax types, consolidate various business
processes  that  in turn cover all areas of tax compliance.  The complexity
of  providing  a  comprehensive solution to tax compliance is influenced by
many  factors  that  illustrate  the  value  of  standards  to Vertex.  For
example,  over 7,800 U.S. jurisdictions charge sales or use tax and each of
them  may  have  some  unique  requirement  for  registration, calculation,
filing, etc.

Again, this is offered as food for thought to continue to generate
discussion.