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Building the tax function of tomorrow—today
As the pressure mounts, the tax office sits at the confluence of change
Tax functions have been coming under increasing pressure for years. It’s not only the way that tax codes and rules change at an exponential pace. Further, the environment in which the tax function operates is rapidly evolving. Three distinct pressures are reaching a tipping point in which tax functions are struggling to keep up: the digitization of business, the evolution of tax authorities, and the continued demand for efficiency in the back office.
What is driving tax authority transformation?
Following discussions at the Organisation for Economic Co-operation and Development’s (OECD’s) Forum on Tax Administration in Beijing in 2016, Deloitte categorized four distinct “groups” of tax authorities in the digitization of tax.
- The compliance group. This group sees the digitization of tax as a smart, efficient means to transition a large “informal” economy into the tax system. Projections for revenue generation drive most decisions about digitization. This group includes South America and the Mediterranean
- The efficiency group. This group recognizes that the digitization of tax can deliver massive efficiencies to tax administration and management. These authorities are often seeking to leverage existing technology penetration to drive digital adoption in the economy. This group includes Southeast Asia, Scandinavia, and the former Baltic states.
- The developing market group. Encouraged and supported by international financial institutions such as the World Bank, this group is looking to leverage new technologies to help developing markets leapfrog into a new era of tax administration. This group includes Africa and Asia.
- The legacy group. This group’s tax authorities are relatively advanced and mature. They are struggling to achieve the value from digitization within legacy IT environments. This group includes markets such as Canada, France, Germany, the Netherlands, the United Kingdom, and the United States.