To Global or Not to Global, that is the question – Oracle Configuration Owner

There should only be one choice

We would never set up a tax solution using anything other than the Global Configuration Owner, so why are so many companies configuring their oracle ebusiness tax engine with it set to be party specific? By that I mean when setting tax rates and rules up then linking them directly to an operating unit.

So why do people set them up this way? Well the short answer is because they don’t know what they are doing. That statement maybe a little harsh so let me justify it.

What is the Tax Configuration Owner?

The following is direct from the Oracle help in R12 but the same is true for Oracle Cloud (Fusion) with a few additional comments by myself; “Your tax setups reflect the tax regulations that a party (thats your legal entities or Operating Units (R12) Business Units in Fusion) is subject to in each separate tax jurisdiction. You can apply the tax setups that you create to the entire company, or you can let individual parties (Operating Unit or Business Unit for example) within the company supplement parts of the tax setup to fulfill specific requirements. You can also let a party create and maintain its own tax setup. When a party supplements tax setup, or creates and maintains tax setup, it becomes a configuration owner of this setup. Otherwise, the party shares the tax setup of the global configuration owner. So, in short, the configuration owner could be an Operating Unit and all the set up to this Operating Unit can only be seen and used by this Operating Unit. The Global Configuration Owner on the other hand can be seen and used by any Operating unit.

E-Business Tax provides the Global Configuration Owner to represent ownership of all tax setups at the company level. The configuration options that you set for each party/regime combination are in relation to the global configuration owner. These options are:

  • Common Configuration – The party uses the company tax setups for the applicable regimes. All parties with a Common Configuration option share the same tax setup. When setting up taxes, tax details, and configuration owner tax options, the global configuration owner represents any party with a Common Configuration. Authorized updates to the tax setup affect all users of the Common Configuration.
  • Common Configuration with Party Overrides – The party uses the company tax setups for the applicable regimes, but with the ability to change, or override, portions of the company tax setup with tax setup specific to the party’s requirements. This is our preferred option as gives best of both worlds and compete flexibility.
  • Party-Specific Configuration – A legal entity or operating unit party does not share the company tax setup, but instead creates and maintains its own tax setup for the applicable regimes. In this case, only this party can use the tax setup it creates.

The Oracle help documentation goes on to say “The Common Configuration option provides the maximum sharing of tax setup among the parties in your company with the minimum amount of maintenance.” This is the main benefit to using the Global Configuration Owner in that the setup, logic, maintenance and pretty much everything else linked to the tax set up becomes much easier.

So what option should I choose?

The documentation even states “All parties that are subject to the tax regulations of a given tax regime should use the Common Configuration option, unless it is necessary to create party-specific overrides.”

So why do we see party linked set up and when would a party-specific override be necessary?

The first and most important thing to realise is that during an 11i to R12 upgrade, Oracle will always use the party configuration owner – it has to. What this means is that every Operating Unit in your 11i solution creates a separate ‘Tax’ (Tax Regime–> Tax) in R12 and the ‘Tax’ is always linked to the Operating Unit. All the tax rules are also then created and linked to the Operating Unit. Therefore, many consultants who have started with upgrades would have probably just followed this method thinking it was the easiest option – or in most cases, sticking with the upgraded tax solution is the quickest and therefore most profitable route so they wont challenge you to make their life harder.

But why would you use party specific when the oracle documentation clearly says (as shown above) that global should be used. The one benefit is that when you create a tax rate that comes under a Global Configuration Owner, it is available and therefore visible to everyone in every Operating Unit and therefore becomes a very difficult mess to deal with when manually selecting the tax rates. Setting the rate to have an Operating Unit as the configuration owner means that only that Operating Unit will see the tax rates so it controls the data seen. This is the only argument and justification used to do it this way and before you start nodding your head in agreement thinking that makes a lot of sense – here is why it is not. After you go live and your company starts to grow, you will have more than one entity, more than one Operating Unit in the same country. That means you have to set the same tax solution up completely from scratch again, lots of work, lots of room for error and if you start using the same rate names then you interfaces and reports start to get confused. So any rate change becomes a days work rather than 5 minutes. The other and more important point is that you should not be using the Tax Classification Code to override your tax! Best practice says that users should never select tax rates themselves so stop letting them. Set up can be done to use intended use or other fiscal classification field that are country specific and so automatically filter out the rates to only show those needed.

So the main argument to use party specific tax set up is flawed.

 

What does this mean to you?

If you are using a Party Specific Configuration Owner then not to worry – your tax will still work, there is no affect tot he logic. It just means you have more maintenance to worry about. The issue is that if you decide to add a new tax regime – you have to also make this Operating Unit Specific as well or any tax rates that are global will show up on very Operating Unit as well as the existing Operating Unit specific rates.

 

Can I change to Global Configuration Owner?

Short Answer is no – there is no silver bullet to convert an Operating Unit Specific tax configuration to a Global one other than reimplementing.

 

Andrew Bohnet
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Andrew Bohnet

Managing Director and Oracle Fusion Tax / eBTax expert at eBiz Answers Ltd
Andrew Bohnet is the current chair for the Oracle Tax Management SIG. He founded eBiz Answers to offer clients complete tax solutions making the most of the rich functionality of the R12 and Fusion tax modules. Whether it is analysis, design, configuration or support, eBiz Answers provide an unparalleled service when it comes to a complete tax solution. Having worked on one of the first Oracle R12 implementations in Europe, Andrew was exposed to the tax module early on and worked closely with Oracle to fix bugs, enhance functionality and present on numerous occasions on the subject of tax and Oracle. When it comes to presenting on eBTax, you wont find a more experienced consultant outside of Oracle.
Andrew Bohnet
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