Tax author­i­ties no longer wait for quar­ter­ly reports. From São Paulo to Stock­holm, tax depart­ments are plug­ging direct­ly into busi­ness trans­ac­tions, demand­ing real-time vis­i­bil­i­ty and auto­mat­ed compliance. 

Steve Sprague has wit­nessed this shift since 2008, start­ing with Brazil’s pio­neer­ing dig­i­tal tax sys­tem, which he helped glob­al com­pa­nies nav­i­gate. Now, as Chief Strat­e­gy Offi­cer at Sovos, a glob­al always-on com­pli­ance tech­nol­o­gy provider that helps more than 100,000 busi­ness­es meet com­plex reg­u­la­to­ry require­ments and auto­mate com­pli­ance process­es world­wide, he guides multi­na­tion­als through an explo­sion of sim­i­lar man­dates across Europe, Asia, and the Americas. 

Sprague built his exper­tise work­ing along­side both cor­po­rate tax teams and gov­ern­ment author­i­ties. His vision of uni­fied tax com­pli­ance — where trans­ac­tion pro­cess­ing, e‑invoicing, and report­ing func­tion as a sin­gle sys­tem — has shaped how Sovos serves its glob­al clients. After spear­head­ing over a dozen deals, he’s seen first­hand what works and what doesn’t when com­pa­nies try to keep pace with aggres­sive gov­ern­ment timelines. 

In this con­ver­sa­tion, Sprague untan­gles the com­plex­i­ty of tax trans­for­ma­tion and explains why wait­ing to mod­ern­ize is no longer an option. 

This inter­view, which you can also down­load, has been edit­ed and condensed.

Q: Regard­ing clean core and SAP S/4HANA, what major shifts and chal­lenges are you see­ing in indi­rect tax com­pli­ance require­ments for SAP users, espe­cial­ly with the increase in real-time report­ing mandates?

What I learned when I got involved in Brazil back in 2008 is that the gov­ern­ment wants real-time trans­ac­tion­al infor­ma­tion now. They don’t want sum­ma­ry reports four weeks lat­er. From a tax per­spec­tive, I actu­al­ly send the invoice to the gov­ern­ment. What was once three coun­tries in 2008 is now approach­ing 47 coun­tries with these ini­tia­tives. Every Euro­pean coun­try is doing this; it’s through­out Asia-Pacif­ic (APAC), and it’s no longer just a Latin Amer­i­can initiative.

The gov­ern­ment is insert­ing itself into an organization’s busi­ness process design. SAP order- to-cash, pro­cure-to-pay, accounts payable solu­tions, sales and dis­tri­b­u­tion, and mate­ri­als man­age­ment — these could be inside the SAP sys­tem or via the SAP Ari­ba net­work. You must take into account what France wants, which has noth­ing to do with what Brazil or Mex­i­co requires. Migrat­ing from SAP ECC to SAP S/4HANA will sky­rock­et because you’ll go into test­ing, and it will break.

The gov­ern­ment can error out your abil­i­ty to col­lect rev­enue or ship. The require­ment for real-time tax data is cru­cial in Brazil. You can’t ship in Brazil with­out this. You can’t move cer­tain goods in Poland or India. It becomes an oper­a­tional issue affect­ing your busi­ness ser­vice lev­el agree­ments (SLAs).

The sec­ond point is that gov­ern­ments want more gran­u­lar infor­ma­tion. SAF‑T, a dig­i­tal file for­mat required by some gov­ern­ments to facil­i­tate tax audits by pro­vid­ing a stan­dard­ized view of busi­ness trans­ac­tions, is basi­cal­ly a copy of a company’s SAP sys­tem shared with a gov­ern­ment. If accounts receiv­able and payable (AR/AP) aren’t cor­rect­ly post­ed to account­ing doc­u­ments in SAP, reports are wrong, and a busi­ness will be audit­ed. Tax author­i­ties are rec­on­cil­ing reports to ensure cus­tomer invoic­es and VAT deduc­tions have made it into the account­ing post­ings and tax report.

“Gov­ern­ments want accu­rate, real-time access to trans­ac­tion­al data, and any dis­crep­an­cies can lead to audits, fines, or even sup­ply chain disruptions.”

The third thing is the tim­ing of data checks. Tim­ing mis­match­es (e.g., a trans­ac­tion and its report­ing not align­ing) could lead to non-com­pli­ance penal­ties or ship­ment delays. Now that the gov­ern­ment is the source of truth, if they approved an invoice three weeks ago, it would bet­ter match this month’s fil­ing. The tax deter­mi­na­tion must be right at the trans­ac­tion — you can’t cor­rect it in the report. It impacts logis­tics, ware­house ship­ping, and even pay­roll. If you don’t get the data right at that point in time, it’s not just a tax issue — it’s an oper­a­tional issue. Gov­ern­ments want accu­rate, real-time access to trans­ac­tion­al data, and any dis­crep­an­cies can lead to audits, fines, or even sup­ply chain disruptions.

Q: Since this is both a tax issue and an oppor­tu­ni­ty for busi­ness trans­for­ma­tion and process opti­miza­tion — which aligns with what SAP is advis­ing its on-premis­es cus­tomers about mov­ing to the cloud and SAP S/4HANA — as you’re advis­ing enter­pris­es about get­ting a solu­tion that can pro­vide that vis­i­bil­i­ty, when in their jour­neys are you talk­ing to them about this subject?

Euro­pean leg­is­la­tion has dri­ven a lot of the multi­na­tion­al base to move for­ward. What I used to see about 12 to 18 months ago is it would come up dur­ing the SAP S/4HANA roll­out in a coun­try, but that’s actu­al­ly too late. It needs to be foun­da­tion­al to your blue­print design because you might have done things in a designed way that is impos­si­ble to roll out in a coun­try based on that tax régime.

For exam­ple, I worked with a com­pa­ny doing an SAP S/4HANA roll­out in India and Colom­bia. They would round tax to two dec­i­mal places on the invoice — 10.10 pesos. Well, Colom­bia rounds to four dec­i­mal places in their schema. India rounds to four dec­i­mal places in their schema. If you’ve already locked in your blue­print and built busi­ness process­es around that, it’s a fair­ly big change when oth­er process­es touch that piece of data.

What we advise com­pa­nies today is don’t wait for your SAP S/4HANA jour­ney. You have to fig­ure out how you will deal with it now because it won’t be 15 coun­tries. If you get to this in two or three years, it will be 60 coun­tries and then 80 countries. 

In the past six months, I’ve been involved with 50 multi­na­tion­als active­ly look­ing at tax strat­e­gy as part of their ERP blue­print design. They’re sit­ting down with their sys­tems inte­gra­tor and ​“Big Four” to ensure their future design and tem­plates are pro­tect­ed and flex­i­ble enough to deal with vari­a­tions. Maybe you don’t oper­ate in Malaysia today, but if your three- year plan includes APAC man­u­fac­tur­ing, you need to under­stand those impacts now.

The sec­ond thing is that you need to look at deter­mi­na­tion, e‑invoicing, and report­ing as a sin­gle thing. It’s not enough just to have an SAP add-on exten­sion name­space for deter­mi­na­tion any­more. Deter­mi­na­tion must work with e‑invoicing, and both must work with your Val­ue Added Tax (VAT) fil­ing and SAF‑T audit file. Lead­ing com­pa­nies look at deter­mi­na­tion, e‑invoice, and report­ing as what the gov­ern­ment does — a sin­gle thing to get to an out­put. I’ve been doing this for 20 years — those that sep­a­rate these com­po­nents blow up at some point.

Con­nect with Steve Sprague on LinkedIn

Q: In terms of the ques­tions around clean core ini­tia­tive and the shift to SAP S/4HANA on indi­rect tax com­pli­ance, is there any­thing else you would add about how a clean core approach, as SAP has defined it, will help pre­pare com­pa­nies to opti­mize their indi­rect tax com­pli­ance in a more future-state way?

You have to look at SAP’s clean core readi­ness to deal with these local­iza­tions and leg­is­la­tions. At its base­line, the high­est lev­el of clean core Tier‑1 means you’re only uti­liz­ing pub­lished APIs. Not every­where around the world for every tax régime, invoice type, or report­ing type is that going to be pos­si­ble. Think about an import-export num­ber like a ped­i­men­to in Mex­i­co that tends to have a lot of cus­tomiza­tion for Maquilado­ra man­u­fac­tur­ing in North America.

What most com­pa­nies have done in invoic­ing com­pli­ance is they have 25 coun­tries in 25 sep­a­rate SAP name­spaces deal­ing with local providers. That just com­pounds cus­tomiza­tion because you have mul­ti­ple pack­age deploy­ments and mul­ti­ple name­spaces. Orga­ni­za­tions should con­sid­er con­sol­i­dat­ing com­pli­ance efforts across regions.

Anoth­er thing com­pa­nies need to con­sid­er is how they plan on han­dling cus­tomiza­tions. You can do it on stack, just like using SAP Fiori, but still be in SAP S/4HANA, pri­vate edi­tion. Or are you going to be side- by-side and use SAP Busi­ness Tech­nol­o­gy Plat­form (BTP) as an exten­sion? Will you do cus­tomiza­tion in the SAP S/4HANA stack or try to do it with­in the SAP BTP tool sets?

Q: Could you explain more about Sovos’ approach in terms of mov­ing toward that inte­gra­tion with SAP and a clean core approach in imple­men­ta­tion while ensur­ing the solu­tion is com­plex enough to deal with all those coun­try- spe­cif­ic needs you mentioned?

We look at the prod­uct require­ments — deter­mi­na­tion, e‑invoicing, report­ing — then the geo­graph­ic require­ment, and then SAP readi­ness. You’d approach a Brazil­ian mar­ket dif­fer­ent­ly than the US mar­ket. Brazil has a mas­sive tax reform com­ing. They’re com­plete­ly chang­ing how they do tax deter­mi­na­tion start­ing in 2025 – 2026, chang­ing how tax goes on the invoice and how it’s val­i­dat­ed and reported.

In the next 18 months, as you pre­pare for Brazil tax reform, not every multi­na­tion­al will have moved to SAP S/4HANA pri­vate edi­tion — you’ll still have SAP ECC. So, in Brazil, we know we have to solve for SAP ECC today and solve all three mod­ules togeth­er. We have cer­ti­fied clean core — what we’ve done for Brazil tax reform with SAP Brazil would be con­sid­ered clean core.

We’ll con­tin­ue sup­port­ing SAP ECC because some com­pa­nies will stay in extend­ed main­te­nance. We must deal with orga­ni­za­tions that might move slow­ly on the adop­tion curve. Some com­pa­nies are only mov­ing to cen­tral finance and pro­cure-to-pay, some are doing orders-to-cash roll­out only (blue­field), some green­field roll­outs, and some brown­field tech­ni­cal roll­outs. But we have 30 years of lead­er­ship in com­plete tax flex­i­bil­i­ty, and we’ll cov­er all bases whether you’re on SAP ECC, extend­ed S/4HANA func­tion mod­ules, or going straight to SAP S/4HANA for efficiency.

Q: You’re see­ing a lot of appetite from com­pa­nies in that posi­tion with this always-on plat­form and with some­thing as com­pre­hen­sive as the Sovos plat­form. I’m curi­ous what appetite you’re see­ing for which com­po­nents from which seg­ments, in terms of com­pa­ny size and that region­al ver­sus glob­al divide, since Sovos caters to both.

The con­cept of e‑invoicing and report­ing is now being dri­ven by the ​“Big Four” and glob­al sys­tems inte­gra­tors (GSIs) con­sol­i­dat­ing that because of leg­is­la­tion across Europe. That’s one area we’re heav­i­ly focused on. Inter­est­ing­ly, deter­mi­na­tion is lag­ging, and that needs to change because peo­ple don’t under­stand that deter­mi­na­tion at the point of trans­ac­tion mat­ters — you can’t wait to do it later.

Most peo­ple focus on rev­enue — orders to cash because billing and rev­enue will be held up. How­ev­er, we’re see­ing more accounts payable and shared ser­vices request for pro­pos­als. You might have a big multi­na­tion­al team run­ning pro­cure-to-pay, and AP shared ser­vice, which is com­plete­ly sep­a­rate from billing, with sep­a­rate teams and SAP structure. 

Big com­pa­nies and big multi­na­tion­als are look­ing for flex­i­bil­i­ty around data extrac­tion because of their breadth of use cas­es and process­es. Your mid­size com­pa­nies are look­ing for sim­plic­i­ty on inte­gra­tion — how to solve as many headaches as pos­si­ble with as few solu­tions as possible.

Q: What’s required from a data per­spec­tive to actu­al­ly gain insights from imple­ment­ing AI into their tax processes?

First, you need to ensure your data design is tax- com­pli­ant. What is the order-to-cash process? What is the gen­er­al ledger design? Will it meet all gov­ern­ment require­ments from a seman­tic lay­er per­spec­tive? That’s foun­da­tion­al, even before you get to AI, which is help­ful for effi­cien­cy and automation.

From a tax per­spec­tive, we’re work­ing on two things. One is effi­cien­cy — how can you do things like goods and ser­vice clas­si­fi­ca­tions to get tax codes? That’s crazy com­plex and where AI can be very use­ful. But we actu­al­ly think it’s mir­ror vis­i­bil­i­ty — pre-audit­ing data and find­ing trends in sup­pli­ers that are caus­ing you challenges.

At the Inter-Amer­i­can Cen­ter of Tax Admin­is­tra­tions (CIAT), gov­ern­ments share their tech­nol­o­gy inno­va­tions. At the last meet­ing, one gov­ern­ment demon­strat­ed a data intel­li­gence sys­tem. They pulled up a tax ID for a man­u­fac­tur­er, clicked to see all their sup­pli­ers, clicked again to see all those sup­pli­ers’ sup­pli­ers, and then clicked to show red areas indi­cat­ing tax issues and dis­crep­an­cies in the sup­ply chain. They clicked one dot and saw the invoice, the hun­dred-thou­sand-dol­lar dis­crep­an­cy, and the phone num­ber to call about the audit.

That’s what’s com­ing from gov­ern­ments with tax automa­tion. That’s why our focus is on help­ing with rec­on­cil­i­a­tion, using nat­ur­al lan­guage search across mas­sive datasets to iden­ti­fy sup­pli­ers caus­ing poten­tial audit risk through tax discrepancies.

“As these com­pli­ance and reg­u­la­to­ry pres­sures con­verge over the next three to four years, ear­ly prepa­ra­tion is key to mit­i­gat­ing risks.”

Q: What oth­er points should SAP cus­tomers to con­sid­er in eval­u­at­ing the state of indi­rect tax compliance?

I think exper­tise over just tech­nol­o­gy. There are going to be a lot of com­pa­nies look­ing for func­tion­al tal­ent, and there will be dif­fer­ent lev­els from exist­ing SIs and third par­ties and con­trac­tors. This tax con­cept is com­plex. This isn’t some­thing with thou­sands of ven­dors who under­stand the nuances of Brazil’s tax reform or how Malaysia fits in. 

With tax com­pli­ance, you can’t oper­ate in Mex­i­co if you can’t com­ply. If your ERP sys­tem can’t process invoic­es, they can shut you off — what they call a block list. They can turn your tax ID off, mean­ing no one can bill you and no one can pay you. 

The one rec­om­men­da­tion I have is there needs to be urgency. With what’s hap­pen­ing with gov­ern­ments, part­ners’ jour­ney to clean core, com­pa­nies going through this jour­ney, and just the capac­i­ty, not just of Sovos, ​“Big Four,” or GSIs — as these com­pli­ance and reg­u­la­to­ry pres­sures con­verge over the next three to four years, ear­ly prepa­ra­tion is key to mit­i­gat­ing risks. I always ask clients, ​“Who’s your biggest trad­ing part­ner?” Nor­mal­ly, they name their biggest cus­tomer. I say no — it’s the gov­ern­ment. The gov­ern­ment impacts how you oper­ate, can shut you down, and can penal­ize you with inter­est. When tax­es, espe­cial­ly VAT in the indi­rect space, are 18 to low-20%, that’s a lot of mon­ey. Com­pa­nies are look­ing at how to max­i­mize VAT deduc­tions because that’s cash flow. It’s not just tax­ing — this per­me­ates oper­a­tions and prof­it and loss impacts. 

As indi­rect tax require­ments grow in com­plex­i­ty, invest­ing in a com­pre­hen­sive com­pli­ance solu­tion like Sovos can help orga­ni­za­tions stay ahead.

Vis­it the Sovos website. 

About Sovos

Sovos is a glob­al provider of tax, com­pli­ance and trust solu­tions and ser­vices that enable busi­ness­es to nav­i­gate an increas­ing­ly reg­u­lat­ed world with true con­fi­dence. Pur­pose-built for always-on com­pli­ance capa­bil­i­ties, our scal­able IT-dri­ven solu­tions meet the demands of an evolv­ing and com­plex glob­al reg­u­la­to­ry land­scape. Sovos’ cloud- based soft­ware plat­form pro­vides an unpar­al­leled lev­el of inte­gra­tion with busi­ness appli­ca­tions and gov­ern­ment com­pli­ance processes. 

More than 100,000 cus­tomers in 100+ coun­tries– includ­ing half the For­tune 500 – trust Sovos for their com­pli­ance needs. Sovos annu­al­ly process­es more than 11 bil­lion trans­ac­tions across 19,000 glob­al tax juris­dic­tions. Bol­stered by a robust part­ner pro­gram more than 400 strong, Sovos brings to bear an unri­valed glob­al net­work for com­pa­nies across indus­tries and geo­gra­phies. Found­ed in 1979, Sovos has oper­a­tions across the Amer­i­c­as and Europe, and is owned by Hg and TA Asso­ciates. For more infor­ma­tion, vis­it Sovos​.com and fol­low us on LinkedIn and Twit­ter.

About ASUG 

ASUG is the world’s largest SAP user group. Orig­i­nal­ly found­ed by a group of vision­ary SAP cus­tomers in 1991, its mis­sion is to help peo­ple and orga­ni­za­tions get the most val­ue from their invest­ment in SAP tech­nol­o­gy. ASUG cur­rent­ly serves thou­sands of busi­ness­es via com­pa­ny­wide mem­ber­ships, con­nect­ing more than 130,000 pro­fes­sion­als with net­work­ing and edu­ca­tion­al resources to help them mas­ter new chal­lenges. Through in-per­son and vir­tu­al events, on-demand dig­i­tal resources, and ongo­ing advo­ca­cy for its mem­ber­ship, ASUG helps SAP cus­tomers make more possible.