The world of indirect tax is in the process of significant change and expansion. It is affecting how businesses are paying it and prioritising data for their protection. Indirect taxes are used by the government to generate revenue and they are becoming more demanding worldwide. In fact, the UK government raised over £1,017 billion in 2023.
There have been considerable efforts to overhaul how indirect taxes are collected, with an emphasis placed on the real-time VAT reporting to provide accurate insight to ensure that the business is compliant.
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However, this has led to concerns about data protection, including General Data Protection Regulation (GDPR) and indirect tax compliance. The handling of sensitive financial data should be a priority for businesses to prevent mishandling by third parties and to meet both legal and ethical standards.
Here is what businesses should consider when attempting to integrate data protection and indirect tax payments:
Strengthening Data Protection Measures for Indirect Tax Compliance
The core responsibility of implementing robust GDPR protocols is to ensure that the confidentiality, integrity, and availability of sensitive tax-related data is maintained and secured at all times. Strategies such as encryption are used to protect data from being stolen, changed, or compromised by scrambling the data into a secret code that can only be unlocked with a digital key.
Other methods that can strengthen data protection include access controls, regular data backups, and rigorous employee training. This keeps all correspondence regarding indirect tax compliant and secure.
Data Privacy Impact Assessment
A Data Privacy Impact Assessment (DPIA) helps you identify and minimise any data protection risks of a project and is required under GDPR. They are likely to be involved in projects that involve high-risk personal information such as digital invoicing or when artificial intelligence is used. This can be used in conjunction with digital indirect tax reporting.
The use of DPIA will benefit your business by increasing your awareness of data and privacy issues and ensuring that your staff is thinking about data protection at the early stages. It also enables you to provide quick responses and reactions to potential data breaches and concerns.
Collaborating with IT and Legal Departments
For streamlined integration of data protection and indirect tax compliance, there is a need for close collaboration between the IT, legal, and tax departments in your business. This allows your organisation to establish effective data protection frameworks for indirect tax compliance that are uniform across each team.
Sensitive tax data will pass across these teams at any given time, so regular communication and cooperation between personnel are essential. Technical controls, policies, and procedures should be implemented to ensure each department knows how to handle sensitive data and what to do in the case of a breach.
