GLOBAL SERVICE / INDUSTRY

Tax and XBRL GL … the logical next step

The phased adoption of XBRL in the tax domain

ADVISORY / FINANCIAL SERVICES

Marc van Hilvoorde Tokyo, november 8, 2005

Tax processes: different data needed

Tax declaration/filing:

“Give us the amount of your profit” Type of information needed:

80 Inspection/audit:

“Prove to us that your amount is correct” Type of information needed:

1 2 3 1 < purchase transaction>2 < purchase transaction>3 © 2005 KPMG Business Advisory Services B.V. a member of KPMG International, a Swiss cooperative. All rights reserved. Printed in the Netherlands.

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Tax processes: create information from data

data

Tax declaration/filing:

“Give us the amount of your profit”

Inspection/audit:

“Prove to us that your amount is correct”

information

Inspection / audit

 Sales transactions with large discounts   Ratio and trend of purchase  sales Percentage and trend of production losses   Profitability compared to the market Purchase/sales changes while stock remains the same  … © 2005 KPMG Business Advisory Services B.V. a member of KPMG International, a Swiss cooperative. All rights reserved. Printed in the Netherlands.

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The logical first step Proprietary standard, specific solution per domain, limited flexibility in defining data requirements

Company X Company X Company X Company Company Company Financial System System System Audit file Financial Audit file Payroll Audit file Other Tax authority Tax authority Back office system Other …( parties?) Financial intermediaries and audit firms © 2005 KPMG Business Advisory Services B.V. a member of KPMG International, a Swiss cooperative. All rights reserved. Printed in the Netherlands.

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The logical next step: XBRL GL

Company X Company Financial System Company Y Company Financial System Company Z Company Financial System

Query Custom Audit file Query Custom Audit file Query Custom Audit file

Tax authority Tax authority Back office system © 2005 KPMG Business Advisory Services B.V. a member of KPMG International, a Swiss cooperative. All rights reserved. Printed in the Netherlands.

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Evolutionary steps in digital tax processes

   Digital filing of taxes (eTax filing) Audit files with transaction information and master data Automated audit procedures – “Look for sales transactions with large discounts” – “Calculate ratio and trend of purchase – “Compare profitability with the market”  sales” – “Calculate percentage and trend of production losses” – “Look for purchase/sales changes while stock remains the same”  Integration with accounting data model and accounting software, opposite to separate tax data model and specific tax software  Query based custom (company specific) audit files, based on a risk profile, per sector, per company, using historical and benchmark data  Completed ‘tax filing forms’ – “We think this is your profit, prove us if this is not true” © 2005 KPMG Business Advisory Services B.V. a member of KPMG International, a Swiss cooperative. All rights reserved. Printed in the Netherlands.

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XBRL for taxes

Digital filing of taxes



XBRL requirements

FR (tax filing) taxonomy

Audit files Automated audit procedures Integration accounting and tax Query based custom audit files

  FR and GL taxonomies FR and GL conversion    FR and GL taxonomies FR and GL conversion Formula link base   FR and GL taxonomies Formula link base    FR and GL taxonomies FR and GL conversion Formula link base

Which parties involved

 Jurisdiction   XBRL international Jurisdiction   XBRL international Jurisdiction   Jurisdiction XBRL international   Jurisdiction XBRL international © 2005 KPMG Business Advisory Services B.V. a member of KPMG International, a Swiss cooperative. All rights reserved. Printed in the Netherlands.

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Wrap up…

    XBRL can be implemented in steps in the tax domain Different tax processes use different kind of information and are supported by different kind of taxonomies (FR  GL) XBRL GL is a critical component in supporting tax processes ..and XBRL International needs to resolve some issues to facilitate the tax domain © 2005 KPMG Business Advisory Services B.V. a member of KPMG International, a Swiss cooperative. All rights reserved. Printed in the Netherlands.

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Thank you

Background

 Dutch governmental project: Building a financial reporting, tax, statistical taxonomy and supporting infrastructure  Project website: www.xbrl-ntp.nl

(English background available)

Marc van Hilvoorde, KPMG The Netherlands

  Vice chair International domain working group [email protected]

© 2005 KPMG Business Advisory Services B.V. a member of KPMG International, a Swiss cooperative. All rights reserved. Printed in the Netherlands.

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