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Tax transformation-trends survey
Part one: Operations in focus
Part one: Operations in focus
New Deloitte research reveals that tax leaders are under increasing pressure to add strategic value to their companies as the move toward business-model transformation accelerates. Based on the results of a global survey on trends in tax transformation (see below) and on in-depth interviews with corporate leaders, we delve deep into three aspects of the transformation: tax operations, talent, and technologies. For each, we review and explore the insights from global business, tax, and finance executives, and share their strategic perspectives. The first in this series is Operations in focus.
Recent Deloitte research revealed six distinctive observations involving the direction of company tax departments
Click on each tab below to explore the interactive charts, which illustrate what we discovered. We also explored several aspects in more depth in a three-part series; see the box above for the most recent instalment.
Observation 1: Businesses are increasingly seeking strategic counsel from their tax teams
Companies are being pushed to develop new digital products and distribution channels, and to accelerate their sustainable transformations—which is taking them into uncharted tax territories. In response to key questions, tax leaders from around the globe said their teams must have the resources and skills to provide more extensive advice to other divisions on digital business models (65%), supply-chain restructuring (49%), and sustainability (48%) over the next two years. This means redefining tax professionals’ priorities and focus, as well as speeding up the adoption of advanced technologies and lower-cost resourcing models in order to meet compliance requirements and free up time.
Collaboration with business counterparts has to become tax’s core focus as companies navigate post-pandemic recovery
Which of the following issues will be the biggest drivers of change for your tax-operation and resourcing models over the next 1–2 years? (Rank 1-4)
There’s still a heavy compliance load today, but the vision for the future would be that much of that falls away and tax people become subject-matter experts who help program the machine, ensure quality control, and redirect their time to advisory activity.
Joanne Walker, Group Tax Director, BT Group PLC
The crisis caused a flurry of stress-testing exercises, which triggered a surge in tax forecasting demands. We had to do two years’ worth of forecasting in 12 months.
Richard Craine, Group Tax Director, Barclays
Observation 2: Businesses have been reaching the tipping point for their resourcing models
The demand for tax departments to team with other units in their businesses are on the rise, but 93% of tax leaders said their departments’ budgets are unchanged or will decrease. To ensure that the tax function can redefine itself as a strategic function at the pace required, leaders are choosing to shift increasing amounts of compliance and reporting duties to a combination of shared-services centres, finance departments, and outsourcing providers that have invested in best-in-class technology. Deloitte’s historical-tax and finance leader-survey data shows a dramatic shift of compliance work away from group tax teams between 2019 and 2021, as models to manage and integrate company resources hit a tipping point. This trend appears set to continue, but tax leaders must plan next steps with foresight in order to help ensure they retain the right expertise to meet the demands of the changing policy landscape.
Respondents indicating their compliance and reporting activities are primarily resourced within their group tax departments
Shifts in resourcing activities, from 2016 to 2019 to 2021
Respondent data indicates that compliance and reporting work is being moved to a combination of shared-services centres, finance departments, and outsourcing providers.
How compliance and reporting activities are being resourced
In the examples below, we highlight the migration of transfer-pricing documentation and indirect-tax returns away from tax departments that has occurred over the last two years, but there were similar trends regarding global tax provision, corporate income tax returns, and statutory accounts.
Observation 3: Digital tax administration is moving faster than expected
In addition to the rising focus of corporate tax departments teaming with other units in their businesses, transformative changes to the ways companies share tax information with revenue authorities are also creating imperative to modernize operations at a faster pace. Nine in 10 (92%) respondents said that changes in revenue-authority demands for digital tax administration will have a moderate or high impact on tax operations and resources over the next five years—and several heads of tax said these shifts are moving faster than expected.
The race is on to get ahead of digital tax administration—which is moving faster than expected
The recent discussion paper by the Forum on Tax Administration—run by the multinational Organisation for Economic Co-operation and Development (OECD) —outlines a new model for digital tax administration. How would you rate the impact this type of development is likely to have on your tax operations and resources over the next five years?
The world is moving towards granular real-time tax and finance data—you can see how quickly territories like Russia and India have moved with VAT. And that presents a real issue, because right now we've got it every month and aggregated.
Global Head of Tax, Global Bank
It’s really stepped up in the last couple of years. Tax authorities don’t just want a faster turnaround for compliance, but access to a company’s systems. It’s not unreasonable to think that in a much shorter time than we expect, compliance will be about companies reviewing a return that’s been drafted by the tax authorities.
Anna Elphick, Vice-President Tax, Unilever
Observation 4: Data simplification and lower-cost resourcing are top priorities
Tax leaders said that if their departments are to step up in advising businesses on best strategies, they must prioritize simplifying data management (53%) and moving to lower-cost resourcing models (51%). Many tax teams are ensuring that they have a seat at the table, as the overhauls to enterprise resource planning (ERP) systems are paying dividends: 56% of those that have introduced next-generation ERP systems and consider themselves advanced users are now highly effective at providing their businesses with scenario-modelling insights. Only 35% of those with moderate to low use of next-generation ERP systems said the same.
Observation 5: Skill-set needs are shifting
Incorporating a new data infrastructure and redesigning processes are critical for the future of the tax unit. Division leaders are aligned in their projections—data skills (45%) and technology process experience (43%) are must-haves in tax departments of the future, but traditional tax-specialist knowledge also remains key (40%). The trick to success looks to be in tax leaders facilitating the way their team members, with their varied backgrounds, can work together to unlock lasting value for their businesses.
Simplifying data management and moving to lower-cost resourcing models are the foundations for future tax models
To what extent are you prioritizing the following measures over the next 1–2 years to help your tax team deliver more strategically valuable, data-driven insights to your business as a whole? (% of respondents who resourced primarily compliance and reporting activities within the group tax department rating each area as a high priority, scoring 8-10 on a 0-10 scale).
Tax leaders are prioritizing data specialists and people who can orchestrate companies’ digital transformations
What skills will your tax department prioritize over the next 1–2 years to ensure it’s positioned to meet the changing needs of the business?
Observation 6: 2020 brought ongoing productivity improvements
Improved productivity (50%) and accelerating shifts to remote working (48%) were cited as the greatest operational benefits to emerge from the COVID-19 pandemic-driven disruption. Still, given that 78% of tax leaders now plan to incorporate either hybrid or fully remote work models into the tax function over the long term, 34% said maintaining productivity benefits is a top concern. And, given these leaders think about building their talent pipelines and strengthening their advisory skill sets, 47% said they must prioritize new approaches to talent recognition and career development over the next two years, while 36% said new processes for involving tax units in business-strategy decisions must be established.
The pressures of the pandemic are strengthening the case for businesses to go faster and further on remote working, managed services, and cloud technology—particularly among CFOs and at the largest organizations
To what extent have the events of 2020 created opportunities for your tax function in the following areas over the next 1–2 years? (% choosing 8–10 on a 10-point scale)
We automated the source P&L process for transfer pricing, which took a huge burden off of the divisions. Then we created a transfer-price database, to deposit and retrieve data, so we have limited impact on the divisions. We are moving to a single ERP platform, which will help us take the next step with robotics.
David Furgason, Vice-President Tax, Stryker
We formed a VAT-technology-and-governance group that has the right knowledge about how to change the system to ensure it generates the right reports. Involving them early was key as we took a greenfield approach so we could think about what the optimal processes would look like and how more intelligent systems could make an impact.
Matthias Schubert, global head of tax, Infineon Technologies
We know that making tax digital is on the horizon for corporation tax, for instance, so we need to ensure we’re looking ahead at those trends within the design process so that we can future-proof ourselves as much as possible.
Joanne Walker, group tax director, BT Group plc
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