Describing Globally Distributed Software Architectures for Tax Compliance

TL;DR

The paper tackles the problem that tax authorities view cross-border reuse of internal software components as implicit licensing, requiring a formal architectural description to report this license structure. It proposes a tax-focused architectural viewpoint and derives a corresponding view from a large multinational microservice architecture, subsequently validating it with four tax experts. The evaluation highlights that the viewpoint is a solid starting point but reveals significant noise due to unclear ownership and jurisdiction mappings, as well as data quality and temporal dynamics. The work demonstrates the feasibility of objectivizing tax-relevant aspects of software architectures and emphasizes the need for continuous data collection and interdisciplinary research to advance tax compliance in software engineering.

Abstract

Background: The company-internal reuse of software components owned by organizational units in different countries constitutes an implicit licensing across borders, which is taxable. This makes tax authorities a less known stakeholder in software architectures. Objective: Therefore, we investigate how software companies can describe the implicit license structure of their globally distributed software architectures to tax authorities. Method: We develop a viewpoint that frames the concerns of tax authorities, use this viewpoint to construct a view of a large-scale microservice architecture of a multinational enterprise, and evaluate the resulting software architecture description with a panel of four tax experts. Results: The panel found our proposed architectural viewpoint properly and sufficiently frames the concerns of taxation stakeholders. However, unclear jurisdictions of owners and potentially insufficient definitions of code ownership and software component introduce significant noise to the view that limits the usefulness and explanatory power of our software architecture description. Conclusion: While our software architecture description provides a solid foundation, we believe it only represents the tip of the iceberg. Future research is necessary to pave the way for advancements in tax compliance within software engineering.

Figures (3)

• Figure 1: An overview of the structure of our study: (1) creating a software architecture description with a viewpoint derived from the concerns of tax authorities and a view of an empirical software architecture using the viewpoint (exploratory) and (2) evaluating the software architecture description with a panel of tax experts (confirmatory).
• Figure 2: A schematic overview of a globally distributed software architecture developed by the fictional devnullsoft Group, a multinational software enterprise with three subsidiaries developing software. Using code components across different jurisdictions is a form of licensing and, thus, taxable.
• Figure 3: The geographical distribution of the microservice architecture of our case company using our architectural viewpoint. The arrows indicate the dependency of the microservice user to the microservice owner. The countries are partially substituted by equivalent countries to ensure confidentiality for the company.