Our last tax transformation trends survey report, in a series of three, has been issued. While the first two reports focused on transformation trends in tax operations and workforce, this last issue is centred on tax technology. This blog aims at highlighting key findings of the reports series.
It shouldn’t be a surprise that tax compliance obligations are increasing around the globe, becoming more complex to manage due to a number of factors, including increased volume of data and filings expected by local authorities, and new technology requirements. Furthermore, tax functions are confronted with increasing expectations from the business for tax advisory support, related for instance to business transformation. Scenario and tax modelling capabilities are becoming a must-have in order to be able to bring added value to the business or to assess the impact of regulatory changes, such as OECD Pillars 1 and 2. Despite this rise in expectations, tax leaders indicate that their department’s budget is remaining flat. In order to find balance between the increasing burden of compliance and the increasing expectations, tax leaders have only a limited number of levers they can influence.
One way to tackle this challenge is to look at tactical solutions. Such solutions focus on bringing in automation around repetitive tasks, through the implementation of robotic process automation (RPA), data wrangling capabilities or bridging with IT or finance teams to raise awareness on tax data and analytics needs. Those solutions will enable an increase in efficiency, but generally not to the point that is needed in the long run.
A more strategic solution entails rethinking tax operating models, assessing in-house capabilities and efficiency against managed services market offerings or shared service centre setups, in order to reduce the cost of compliance. Since tax functions typically do not hold the purse strings, it will be even more important to capitalise on major finance transformation projects (such as NextGen ERP implementations) that could impact nearly every aspect of the tax playing field. It is therefore key for tax leaders to be more engaged in technology discussions and gain influence with finance, IT and even senior management. A mindset shift is needed from being a data consumer to being actively engaged with the upstream data preparation value chain.
Coping with such transformations require tax functions to access the right talent pool. There are a limited number of unicorns that combine tax speciality, with technology and advisory capabilities. While tax specialists and accountants will no doubt be needed, tax leaders are looking at sourcing data analytics and technology/process transformation profiles. While there is no one-size fits all approach to bringing technology into tax departments, quick wins haven taken the shape of pairing in-house complimentary skills profiles into collaborative teams, breaking up functional domains to pull together diverse skills sets and enable new solutions to be identified and implemented.
There is no doubt that tax functions need to transform to adapt to rapidly changing business requirements and compliance obligations. There is unfortunately no off-the-shelf recipe to engage in such a transformation journey. Every journey starts with a first step. In this context, a first step could be establishing a tax technology vision and/or roadmap to help your tax department prioritise how technologies may enhance their operating models. None of these need to be set in stone but engaging on this first step might have a butterfly effect and get the engine rolling.
Access the full reports below (all three reports were issued between 2021 and 2022):
If you would like to discuss this topic and potential way forward for your organisation, please do reach out to our key contacts below.