PETALING JAYA: Domestic businesses of all scales are facing challenges in integrating modern tax technology into existing systems, as many companies are still using legacy accounting platforms that are not built to work seamlessly with newer digital tools.

As a result, adding solutions like e-invoicing modules or AI-powered tools can become a complex, time-consuming, and costly process.

Ernst & Young Tax Consultants Sdn Bhd associate partner, international tax and transaction services Derek Chan (pic) said this makes it harder for companies, particularly small and medium enterprises (SMEs), to keep up with changing tax requirements and slows down their digital transformation journey.

“Companies also need scalable solutions that can handle high transaction volumes across multiple entities, especially during peak periods like month-end or annual reporting.

“The technology adopted needs to be agile, to keep up with business developments and regular changes in tax rules. As new laws and regulations are introduced, tax teams often implement additional tools to address these.

“Over time, the tax function evolves into a patchwork of disconnected platforms, spreadsheets and manual workarounds,“ he told SunBiz.

Chan said that the cost of investing in technology can also be a major challenge, especially for many SMEs, as their budgets are usually tight and investing in new technology can be risky, resulting in significant unplanned costs if a clear technology strategy is not in place.

“Hence, companies must choose user-friendly technologies and service providers who are accessible and supportive when issues arise,“ Chan said.

Elaborating further, Chan stated that the government, particularly the Inland Revenue Board (IRB), must play a pivotal role in shaping the digital tax landscape.

He said the IRB has previously introduced new policies and technologies, such as the phased rollout of e-invoicing, providing clear directions and guidelines to taxpayers to ease the adoption of e-invoicing.

IRB’s digital platforms, such as the MyTax Portal, are continually being improved to ensure they are convenient and accessible.

“Investing in the correct technology infrastructure, such as larger servers to handle all the e-filing obligations during tax peak period, enhancing data analytics capabilities to process submissions and perhaps integrating AI for more targeted audit selection, will place the IRB at the forefront of technology adoption to promote a digitally-savvy environment for businesses,“ Chan said.

To support this shift, Chan added the government can also offer targeted incentives and grants.

He said that currently, businesses can claim tax deductions for certain costs related to e-invoicing, such as software or consultancy.

“This helps reduce financial burden, especially for smaller companies. Grants and subsidised training programs from the government could further support SMEs in adopting technology.

“Industry bodies like the Malaysian Institute of Accountants (MIA) and the Chartered Tax Institute of Malaysia (CTIM) also play a big part by educating businesses, sharing best practices and giving feedback to the government to make sure policies are practical,“ Chan said.

When asked about how Ernst & Young is investing in talent and tools to stay ahead in the tax technology space in Malaysia, Chan said the firm is investing heavily in both people and technology.

“On the people side, we are upskilling our tax professionals in areas like data analytics and the use of AI. We are also hiring individuals with hybrid skill sets, those who understand both tax and technology.

“This allows us to build and manage sophisticated tools in-house and offer more innovative and practical solutions to our clients.

“On the technology front, we are building and adopting various tools that support e-invoicing, corporate tax filing, indirect tax filing and transfer pricing.

“We are continuously investing in new technologies so that we can deliver cutting-edge services to our clients at a reasonable price.

“We want to be known as a tax technology firm that uses tools to provide tax services to clients, leverages technology to advise clients in managing their pain points within their tax processes and is at the forefront of assisting clients in tax automation,“ Chan said.

 Business