Tipping point: Business leaders embrace a new role for the tax function

By Annamaria Maclean and Jodee Webb

While 2020 was the year that turned business and society on its head, 2021 brings the opportunity to reshape them for the future.

Governments have big decisions to make about how they address mountainous deficits, how they build more sustainable economies, and the future of globalization.

Meanwhile, companies are positioning themselves to thrive post-pandemic: shoring up their finances, accelerating digital and sustainable transformation, embedding new ways of working, and identifying new growth opportunities.

The tax function sits at the interface between companies and governments as these decisions play out, and its strategic insight will be more in demand than ever before. For instance, as companies change their business models for the digital era or invest in green initiatives, failing to understand the tax implications—in areas where the rules are still nascent and evolving— may leave significant value on the table, or worse still, undermine the success of the new strategy.

As businesses map out their growth plans for the recovery, they will need to call on forecasting and scenario modelling capabilities often found in tax teams, to get a deeper understanding of financial resilience. All of this creates a new business partnering and collaboration imperative for company tax functions.

The C-suite can no longer afford for their tax teams to be consumed by routine compliance and reporting activity. For tax to truly deliver on its new mission, businesses need to reset the boundaries of the primary remit of the tax function, free up resources, and transform its technology infrastructure. The good news for tax and business leaders is that the tools to achieve this are increasingly at their disposal.

Deloitte recently launched the results of its global Tax Transformation Trends survey. This survey involved interviewing more than 300 tax and finance executives globally. This survey engaged tax and finance executives at multinational companies to understand their strategies for tax operations, talent and technology. In particular, asking the following questions on the future of the tax function:

• What should be the future role of a tax team? How is its core focus changing?
• What are the operational changes that will pave the way for tax to add more value as a business partner?
• How can tax leaders accelerate the transformation journey?
  
  

Six key insights emerged from the findings:

1. Urgency to transform resourcing models is greater than ever. 93% of tax leaders say their budget is remaining flat or falling, while business partnering demands between tax and finance leaders and their business counterparts are on the rise.
2. The strategic value of tax must be realised faster as companies accelerate business model transformation. 65% of tax leaders say the shift to digital business models is a key area where the business needs its guidance.
3. The race is on to get ahead of fast-evolving digital administration trends in tax authorities. 92% of survey respondents say transformative changes to the way companies are being required (electronic filing, real-time reporting, etc.) to provide tax information to revenue authorities is also creating an imperative to modernise at a faster pace. These tax and finance leaders say that shifting revenue authority demands on digital tax administration will have a moderate or high impact on tax operations and resources over the next five years- and leaders say the trend is moving faster than expected.
4. Tax leaders are prioritizing data simplification and lower-cost resourcing as a foundation for the future vision. Simplifying data management (53%) and moving to lower-cost resourcing models (51%) are the priority strategies as tax redefines its role.
5. CFOs are beating the outsourcing drum the loudest. 44% of C-level respondents (two-thirds were CFOs) think outsourcing is the most important strategy for lower-cost resourcing models, ahead of automation (39%) or shared service centers (31%). The survey shows a gap between the strategies the C-suite see as most important and those Tax leaders, who favor shifting work to other parts of the business, see as most important.
6. Those already on their transformation journey are already seen to be adding strategic value. Where tax teams have introduced next generation enterprise resource planning (ERP) systems, 56% are seen as highly effective at supporting the business with scenario-modelling insights, compared to 35% of others.

All of this creates a new business teaming and collaboration imperative for company tax functions.

“The C-suite can no longer afford for their tax teams to be consumed by routine compliance and reporting activities. To truly deliver value to the business, the tax function needs to rethink its resourcing model and transform its technology infrastructure to create capacity and control costs. The good news is that tax and business leaders have more options at their disposal to achieve this” - Phil Mills, Deloitte Global Tax & Legal Leader.

The detailed results are contained in a 3-part series of reports. Tax Operations in Focus ,the first report in the series, reveals tax leaders are increasingly being sought out for strategic counsel as companies accelerate business model transformation. In this report, Deloitte discusses with leaders the fast-moving trends that are driving businesses to shift where and how the tax function adds value, understand their future vision, and how they plan to get there.

To start the process, organisations can undertake an initial assessment of the current state of their tax function. To help you develop an initial assessment or benchmark we can use Tax Cube, a risk assessment diagnostics tool. The Tax Cube is a comprehensive set of questions based on best practice in the area of tax risk management and is completed in a half day workshop with your tax / finance team and other key stakeholders.

The results of the workshop are summarised in a heat map which will then enable you to identify priorities for change and clear actions to take forward.

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If you would like to discuss the findings of the survey, tax function resourcing solutions for current and future needs or are interested in running a Tax Cube diagnostic workshop, then please get in touch.

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• Tipping point: Business leaders embrace a new role for the tax function
• Progress towards a multilateral solution in international taxation
• Snapshot of recent developments