A lot of companies benefit from innovation deduction. However, the multiple advantages that can be derived from it, are not always clear. That is why EY introduces the Innovation Deduction Calculation Tool, a co-production of EY Tax consultants and EY’s innovation hub The Factory.
Why did you develop the Innovation Deduction Calculation Tool?
Pieter Van Den Berghe, Director EY: “EY is the market leader in guiding companies when it comes to innovation deduction. Unfortunately, during meetings with our clients, we noticed that it was hard to demonstrate the concrete advantage.”
The tool was developed in-house, together with EY’s innovation hub The Factory. Was this a conscious choice?
Van Den Berghe: “Yes, definitely. EY has made the strategic decision to reinforce its clients’ innovation process, as well as to stimulate an in-house innovation culture. The Factory supports the EY business teams in the search and development of process improvements and innovative tools. Therefore, it was logical we worked with our colleagues from The Factory to dive into the Innovation Deduction Calculation Tool.”
Bart van Gompel, User Experience Lead at The Factory: “We connect matching internal and external specialists. The Factory enables not only innovators within EY, but also at other corporate companies and at startups & scale-ups within our community.
It makes us most happy when our matchmaking generates synergies and co-creations. To this end, The Factory organizes hackathons and works together with startups to tackle corporate challenges.
In addition, we aim to guide our colleagues through the innovation process by offering trainings such as Lego Serious Play and Design Thinking sessions at the EY wavespace in Antwerp. These services are also available to our clients in order to facilitate their innovation process.”
What was your strategy in building the innovation deduction tool?
Van Gompel: “We translated the broad fiscal knowledge of our colleagues into a user-friendly, intuitive software tool. Instead of using the usual waterfall model, The Factory applies the lean startup methodology which allows us to achieve results much faster.
Last year, in September, Pieter came up with the idea to develop the tool. In January, we already launched a minimum viable product (MVP) which, step by step, improves and expands based on user feedback.”
How is the tool being received?
Van Den Berghe: “It is very useful for us if we can explain the concept of innovation deduction to our clients in a clear way. They find it interesting to be able to compare the different kinds of impact that several scenarios can have on their business. The tool visualizes what the deduction means for their profit -how much is exempted- and for their taxes.”
Which tools has The Factory yet developed?
Van Gompel: “We have developed useful smart templates for various EY-services and they have proven to be time saving and yield a lower margin of error. In addition, we developed the TiLT tool, which is an EBITA Calculation Tool that gives clients a grip on the complex fiscal measures concerning the limitations of interest deduction.
What is the added value of such tools?
Van Den Berghe: “With the Innovation Deduction Calculation Tool in particular we speak the same language as our clients. These clients are often companies who are already involved in innovative developments. Just like EY!
The tools we develop are not ‘marketing’: they mainly represent significant added value for our service offerings. In my opinion, this is what it’s all about in our current second wave of digitization.
Digitization is no longer just about automating processes, above all it is about adding value to the advice we give to our clients.”
Let’s go back one more time to the Innovation Deduction Calculation Tool: what is the tool’s position in the advice on innovation deduction?
Van Den Berghe: “In the first phase of our advice, during a workshop in which we analyze the feasibility of the innovation deduction, the tool is a facilitator. If the client decides to continue, a thorough analysis of the calculation will follow. We then help the client to adapt the organization in order to obtain an optimal application of the deduction.
Many clients decide to request a ruling from the tax authorities to get certainty. Rulings are becoming increasingly important in innovation deduction cases, and, also on this level, EY is a pioneer.