What will tax functions look like in the future?
- More focus on real time reporting rather than annual compliance cycles - With 48% of people surveyed not being able to get access to high quality historical data quickly, this is a concern that many organisations will need to tackle.
- Fully technology enabled - There is a significant increase in demand for new and different technology, but organisations often struggle to identify the best tax technologies for them.
- Data centric - In response to tax authorities increasing their use of data analytics, artificial intelligence, and machine learning algorithms to identify discrepancies and anomalies in tax returns, companies will have to focus on digital audit trails and data quality and controls. Using new tools such as AI safely, will become increasingly important.
- Have a different tax professional and different ‘outsourcing needs’ - Tax professionals, both in-house and outsourced support, will need a different set of skills in areas such as data analytics, risk and governance, technology and operations.
It’s time to rethink tax compliance
In the face of a relentless rise in regulatory demands, today’s tax leaders need a more connected, data-driven approach to compliance and reporting.
Probably one of the most overused phrases in the finance and tax world is that the compliance and regulatory burden is increasing. This can be a worry for many organisations, but arguably it’s an even greater problem when 50% of tax leaders surveyed state that in-house tax headcount will stay the same and 59% state that they will have the same budget or less budget to deal with an increasing workload.
With some tax departments being responsible for 8 or more different taxes/compliance processes in many territories, this is a lot to manage.
Adopting innovative approaches to compliance, collaborating and co-sourcing skills and technology will help accelerate your ability to respond to these challenges.
Rethinking how you ‘Connect’ data, teams, processes and insights across all elements of compliance and reporting to reduce the reporting burden.
Tax is uniquely placed to create greater value for the organisation and accelerate outcomes
Tax has an opportunity to create lasting, organisation-wide benefits. Organisations want visibility, transparency, data analysis, and insights that go beyond tax. It is no longer just about the completion of ‘historic’ tax returns, but leveraging tax data to look forward.
When we asked organisations what they see as the biggest opportunities for them/their tax functions to add value to their wider organisation, they answered as follows:
- Tax optimisation - 52% - “The level of automation should be prioritised to dispose of freed resources on analytical procedures, building tax strategy and minimise tax-related risks.”
- Proactive management of tax risks - 46% - “We have to ensure that our approach and commitment to tax compliance is embedded throughout the organisation, so that appropriate mitigations can be taken on a solid basis and so that tax authorities don't feel they need to intervene.”
- Greater focus on business partnering 45% - “Outsourced providers (need) to understand that they are potentially our main regulatory 'eyes and ears' on the ground and share developments with us.”
It’s time to reframe the conversation and bring tax to the forefront of every business and strategic conversation.
Making tax technology deliver value should be at the heart of tax function strategy
Technology point solutions and tax modules within ERP are the top two technologies used to support tax compliance delivery - however they are only used by approximately half of companies surveyed.
With only 27% of respondents using smart automation and 24% using automated controls to manage the execution of tax processes to a great extent, there is still a way to go in terms of organisations fully embracing the value of technology in compliance.
When it comes to investing in technology solutions, we recommend the following steps:
- Plan ahead - When building a solution, you should consider how you can be future-focused and scalable. Often organisations don’t need to build or buy technology directly, new co-sourcing options with third party providers, as well as outsourcing, can eliminate the need to buy technology and ensure that you always have access to the latest market leading technologies.
- An integrated finance and tax technology suite - Standardising process and getting tax sensitised data into one system allowing that data to be used efficiently in any different tax processes should be at the heart of this.
- Explore wider opportunities for supercharging tax technology investment - There is a once in a generation technology modernisation program underway, with many tax and finance technology products moving to the cloud and providing more optionality for tax. This presents a real window of opportunity to look holistically at your finance and tax technologies.
Getting your hands on good quality tax data
With the rise of real time reporting, having good quality data at your fingertips is going to become increasingly critical.
However, the reality that lots of organisations face is that with disjointed finance and tax technology systems and a lack of in-house technologies that can provide a digital audit trail, this is difficult. Tax data is housed in multiple locations and often isn’t available in a tax-ready format. In many cases, the information is in less useful forms with an inadequate level of detail, and gathering it can be difficult because it can span multiple geographies and business units.
Our survey highlights that only 29% of organisations surveyed said that ‘all data I need for tax compliance is stored in a central repository’ and only 26% had a full digital audit trail.
Plus with 31% of respondents saying the quality of data to be used in tax processes was less than good and 44% not being able to access high quality historical data quickly. It is not just about having data in one place and connected digitally, they also need better quality data.
We believe that having a clearly defined data strategy should cover 4 key areas:
- Gather - One-time, flexible data capture for multiple purposes.
- Transform - Standardising and enriching data through a common data model and making data available throughout the compliance and reporting process.
- Activate - Complex analysis automated to enhance the reporting and planning experience.
- Experience - Results, insights, and analytics customised to your needs and delivered with a better user experience.
The challenge of Pillar Two
For 87% of those surveyed, Pillar Two was going to be applicable to their organisation, creating a much increased compliance burden that they need to be prepared for, particularly as these rules require an entirely new data set to be gathered and analysed.
However, organisations are at very different stages in terms of how well prepared they feel for Pillar Two:
- 23% said that they felt very well prepared
- 36% were partly prepared
- 13% were not very well prepared
- 15% did not know or were yet to consider Pillar Two.
Having a centralised, connected and controlled process is essential to help speed up preparations for Pillar Two, as organisations need to:
- Deliver local and global calculations,
- Ensure compliance with all specific, local compliance requirements,
- Keep on top of changing rules and regulations, and
- Provide consistency in data and approach across territories.
Thinking beyond just the initial Pillar Two calculations, to how these fit with your wider compliance processes, is key. You will need to use data smarter and create efficiencies in the process to be able to comply. With time running out the pressure is on to make sure you are ready.
About the survey
Our Future of Tax Function survey, fielded 9 March to 16 May, surveyed 273 managers, directors and vice presidents of tax / finance about how they ran their current tax functions/delivered their tax processes and how they expect this to change in the future.
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