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Tax Operating Models

Operate with agility

It’s time for the tax operating model to change

Finance and tax leaders worldwide are searching for new ways to work smarter, faster, and more efficiently as they grapple with rapidly changing regulatory, technology, and talent dynamics. These challenges are driving them to reimagine decades-old tax models and processes, and to implement a new operating model that makes sense for their business today—and tomorrow.

Dramatically new tax environment

In 2015, the Organisation for Economic Co-operation and Development issued its Base Erosion and Profit Shifting (BEPS) guidance. It called for increased international cooperation and information sharing, and sparked major changes across the global tax landscape. Today, more than 130 countries and jurisdictions collaborate on BEPS implementation, including Canada, as governments try to close tax loopholes and improve domestic tax revenues.

The result? More tax scrutiny—and potentially more tax audits. The Canada Revenue Agency is already adopting a more sophisticated regulatory scrutiny of tax filers and asking more questions about companies’ tax functions and their approach to risk management.

At the same time, tax teams face rising pressure to be more efficient, forward-looking, and focused on delivering insights to senior decision-makers. And the technology that’s transforming industries globally is making its way into corporate tax departments.

In response, chief financial officers and heads of tax are thinking hard about how to effectively and efficiently run the tax function in an increasingly complex business environment. Reimagining the tax operating model affects how tax works, the resources it needs, and how it evolves in an ever-changing world—and technology, talent, and processes all play a part.

Is it time for a new operating model for your tax function?

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Embracing technology

Cognitive computing and robotic process automation (RPA) are at the forefront of tax departments’ efforts to use technology to become more efficient and deliver better business insights. These and other technologies can also be the foundation for a new operating model.

Powerful analytics tools are turning massive data volumes into valuable sources of business intelligence, improving both tax compliance and insights. Cognitive computing and RPA can be used to automate time-consuming, routine, manual tasks, freeing tax professionals to focus on strategy and other forward-looking matters. On a global scale, such automation technologies can represent a significant investment; yet Canadian tax departments with more modest needs or ambitions can use RPA to automate discrete, “bite-sized” processes, quickly achieving a meaningful return on investment.

What factors are driving tax transformation? How can tax departments drive more value for their organizations?

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Reinventing work

The convergence of technology and talent creates opportunities for tax leaders to rethink their operating model in terms of the work itself, the workforce, and the workplace.

  • The work. In the near future, tax professionals will work alongside machines. Technology will do the repetitive “manual” tasks while the tax team focuses on using experience, judgment, and communication skills to help guide the organization.
  • The workforce. Tomorrow’s tax department will assemble machines and full-time contingent-- even crowdsourced—human labour, scaling up or down to meet the specific needs of the business. 
  • The workplace. Technology already enables geographically dispersed teams to collaborate effectively. For tax leaders, physical proximity will be far less important than the ability to access the right skills and knowledge at the right time.
 
Reimagining processes

Adopting a new tax operating model that capitalizes on automation may require tax departments to change long-established processes. Today’s tax teams are challenged by sequential processes, a lack of standardization, ad hoc requests, repetitive tasks, and a workpaper-centric approach. Digital technologies can help address these challenge, by automating and standardizing work, scaling up or down to accommodate demand, and enabling tax professionals to more easily work with raw data rather than collecting and manipulating it for each task or project.

 

Rethinking resourcing

Companies are also reconsidering how they resource their tax departments. There are several possibilities, the most suitable of which is the one that aligns with an organization’s culture and business needs:

  • Insourcing. In this model, companies perform production work using a mix of staff, internal shared service centres, tax technologies, and process automation. It’s most effective when coupled with smart decisions about headcount, functional realignments, process improvements, and technology enhancements.
  • Outsourcing. With outsourcing, production work is typically obtained from a third-party provider who has the economies of scale needed to achieve both significant process automation and appropriate levels of specialized staffing. Shared services and tax technologies can remain in-house or not, or they can be divided on a case-by-case basis. 
  • Operate. In this model, an organization turns most, if not all, of its tax function over to a third party to operate. This can involve an integrated technology platform and even the transfer of corporate tax staff to the third party—an attractive option for companies that have struggled to modernize or recruit new talent.

Take action: Seven key considerations

Choosing the right tax operating model for the business challenges of the digital era is a vital part of tax transformation. Tax leaders can start by considering seven actions:

  1. Define a vision for the tax department. Focus on a shared vision of the defining characteristics of your tax department three to five years down the road.
  2. Understand perspectives and expectations. Gather insights from tax stakeholders and customers, and identify the challenges that tax transformation can tackle.
  3. Assess effectiveness. What are the key competencies of your current tax department? How can you improve performance and create more value for the business?
  4. Prioritize opportunities. Think about tomorrow’s tax department. Identify key responsibilities based on their potential value to the business, and prioritize investments in those areas to make the greatest impact.
  5. Develop initiatives and mobilize. Dig into root causes of any issues and identify potential approaches to address high-priority competency areas. Develop action plans with milestones and owners.
  6. Confirm the tax department’s commitment. Identify areas of confidence and concern with respect to the tax department’s initiatives, and commit to taking specific actions.
  7. Secure buy-in and funding. Upfront and ongoing interactions with key stakeholders can help tax integrate its transformation with the rest of the business.

 

It’s time to harness the Power of With

Deloitte member firms around the world are exploring how tax departments can use the Power of With to transform and bring new value to their organization. Ready to learn more? Start here.

 

The right tax operating model can help your tax team operate with agility in a fast-changing world

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