Why a tax compliance management system fails in day-to-day practice: my insights from a recent conversation

Many companies that have implemented a tax compliance management system find themselves wondering: why is there no sign of it in day-to-day work? There may be several reasons for this. One possible reason is the mindset of the staff. If staff do not embrace the TCMS, even the best theoretical version of it will have no effect whatsoever. A report on day-to-day life by Paul Liese.

I recently had an interesting call with a prospective client who was keen to find out more about ICS coaching in the form of workshops. The company is actually well organised: risk-control matrices are in place, control measures have been defined and responsibilities are clearly assigned. In other words, exactly what is traditionally understood by a functioning tax compliance management system. And yet there is a problem: the controls are simply not being carried out in day-to-day operations.

It soon became clear during the discussion that the problem is not that the company lacks structure. On the contrary: the technical framework is well established. The problem lies elsewhere: the people who are supposed to carry out the checks are not doing so. Not because they are unable to.

But because:

• it gets lost in the day-to-day running of the business
• it is not seen as a priority
• the personal benefit is not clear
• and implementation often takes place too far removed from the actual tools

That’s a pattern I see time and time again.

Many companies invest a great deal of time in setting up a TCMS. Documents are drawn up, risks are assessed and measures are defined. But let’s be honest: a TCMS that exists only on paper brings no real added value in day-to-day operations. If controls are not carried out, the system effectively does not exist. And that is precisely the crux of the matter: compliance is not achieved through documentation, but through consistent implementation.

What today’s conversation has once again confirmed to me is that a TCMS only works if it is part of day-to-day work. If control measures are „housed“ in separate tools or Excel spreadsheets that have nothing to do with the actual workflow, they will sooner or later be ignored. That is why I strongly recommend integrating tax compliance into the systems that are used on a daily basis anyway.

For example:

• Tasks and reminders in Microsoft 365
• clear allocation and tracking
• automated workflows instead of manual lists

Checks should not feel like extra work, but should become a normal part of the job.

What became particularly clear in the call mentioned at the start was that the company does not so much need new methods as a change in mindset. Ultimately, employees always ask themselves (consciously or unconsciously), „Why on earth should I do this?“ If there is no clear answer to that question, the task will not be carried out.

• That is why it is crucial to shift our focus:
• Away from „That needs doing“
• Go to „Here’s what you’ll actually get out of it“

For example:

• greater confidence in one’s own work
• fewer queries
• clear processes
• Protection against errors and risks

It is only when staff understand the benefits that a genuine sense of commitment develops.

Following this discussion, I would give every company three pieces of advice:

1. Don’t build a TCMS just for documentation purposes
   A system that looks good on paper is worthless if it isn’t used.
2. Integrates checks into existing tools
   Wherever work is being carried out, inspections must also take place.
3. Does it really appeal to people?
   It explains not only what to do, but above all why.

This is precisely where Opti.Tax comes in. Our approach is not to create yet another stand-alone system, but to integrate genuine tax compliance into existing work processes, actively support the carrying out of checks and ensure transparency regarding their status. After all, ultimately it’s not about having a TCMS, but about ensuring it works.

Today’s call has once again made it very clear: the biggest challenge in tax compliance is not the technical design, but its day-to-day implementation. After all, a tax compliance management system that is not put into practice is nothing more than a paper tiger with no teeth or claws. If tax compliance exists in theory but is invisible in practice, it is most likely down to the mindset of the staff.

That is why every Tax Compliance Management System needs to be accompanied by effective communication. This is the only way to ensure that the benefits are firmly embedded in employees’ minds. With the right level of conviction, the TCMS will gradually come to life. In other words: a TCMS is only as good as the people who implement it.