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 regime.
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 regime, 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.