Without a clearly defined data strategy Pillar 2 could be the largest liability you are currently facing. Pillar 2 compliance is not simply a tax issue; it is a data challenge. The legislation demands potentially thousands of data points from various sources, which need to be collected, aggregated and reconciled consistently, accurately and on time. For in-house tax teams, getting your data strategy right from day one prevents penalties, late payment interest, reputational damage and lost safe harbours but can also drive efficiencies across wider tax and finance functions.
Here are five data best practices to help you get ahead.
1 – Assess Your Data Readiness
Pillar 2 compliance begins with clarity – you cannot manage what you cannot see. An effective Pillar 2 data strategy starts with understanding what data you need and where it lives. The OECD’s GloBE rules define dozens of new tax calculation inputs. In practice, this data will come from diverse source systems. The main data challenges come from understanding the data requirements and then obtaining the necessary data. Tax leaders should build a data map now, linking each Pillar II metric back to its source and defining clearly who “owns” each data point and how it’s calculated. This removes ambiguity when questions arise.
We recommend starting with a Data Readiness Assessment. Our Data Readiness Workbook ensures you can conduct an assessment that is thorough and logical. By doing this you can uncover gaps before they become compliance issues, which can then inform your roadmap to compliance.
2 – Leverage Your Existing Data
Once your data landscape is clear you can leverage your existing data and align current processes with Pillar 2. Many businesses will already have a large amount of the data required for Pillar II but it is siloed and not in the right systems. By aligning your systems you can streamline your processes. Wherever possible data can be used for multiple functions, this removes manual effort and helps to ensure consistent figures across processes. This is a quick win that can dramatically improve your position. As a result, tax and finance professionals can spend less time reconciling data and more on high-value analysis and strategic planning.
3 – Improve Processes
Pillar II could be a key catalyst to drive internal improvements, it creates an opportunity to consider whether current processes can be improved or adapted. Once the quick wins have been taken most companies will still need to make significant adjustments to their source data to develop tax ready information to comply with Pillar II. Manual spreadsheets and fragmented systems won’t scale to meet the demands of Pillar II. Pulling numbers from dozens of systems or spreadsheets is error‑prone. Centralising data in a single system helps to ensure mappings, validations and rules are applied consistently.
This doesn’t just improve compliance, it improves efficiency. Centralised, standardised data streamlines Pillar II by allowing increased automation, reducing errors and confusion over definitions. Automation saves time and frees up staff to complete more valuable, strategic work. If tax isn’t considered when structuring workflows and systems you’re locking in data issues and manual workarounds. In-house teams often find that sharpening the underlying data flows not only helps them comply but also benefits the wider finance function.
4 – Build Flexibility for Evolving Rules
Pillar II isn’t static – OECD and local guidance continues to evolve, so designing flexibility into your data strategy is crucial. Jurisdictions are implementing the rules at different times and with their own variations. Your solution needs the ability to cater for additional entities, adjustments and local variations. By keeping your system adaptable and monitoring guidance updates, you can avoid costly re‑engineering and disrupting established workflows as the legislation evolves.
5 – Plan for Audit Readiness
Transparency with tax authorities is a core goal of Pillar 2 and filings will be scrutinised by multiple tax authorities. That means audit readiness is essential. Discrepancies between tax provision and tax return calculations can result in return-to-provision adjustments which could distort your calculated effective tax rate as well as threaten your safe harbour eligibility. Ensuring your systems can produce a detailed audit trail ensures that you have visibility over how a number was calculated and what inputs have changed.
Act Now
The window to prepare for Pillar II is closing fast. At Praesto Consulting, we can help turn Pillar II from a compliance burden into a strategic advantage. Our Data Readiness Workbook and tax and systems experts can guide you through assessment, roadmap development, and software implementation. Contact us today to get started.