Amp up the value of your tax transformation

Your tax function—elevated

Nearly every element of the tax landscape has rapidly evolved over the past decade, from the adoption of tax technologies—the digitization of overall transaction processing, the migration to cloud-based ERPs, and the implementation of Generative AI (GenAI) in tax functions—to the expectations of tax authorities and the structure of tax teams.

Tax has become one of the largest consumers of organizational data because of this evolution. Almost every accounting transaction now has an elevated data requirement and tax implication associated with it. This is one of the most significant changes of the last 10-15 years; previously, tax was largely considered a manual function due to the complexity and confidential nature of tax information.

To keep up with these changes, tax leaders should aspire to have a seat at the table during enterprise financial transformation, with the goal of moving tax functions and teams from a back-of-the-line step in the process to a strategic business partner, bringing enhanced, future-focused value to the organization beyond compliance with tax regulations.

Communicating your team’s needs, gaining organizational support, and ensuring a high degree of efficiency are contingent upon developing a detailed tax technology strategy which maps out the data management needs of your tax function. Without a robust roadmap in place, tax teams may struggle to communicate their “why,” provide a high level of strategic value, or more effectively plug into larger enterprise transformations. This can result in tax teams continuing with outdated and inefficient methods, rather than more advanced, data-rich ones.

By following the three-step process below as a guide, your organization can be well-positioned to develop a robust, tech-enabled strategy that builds on the combined strength of your people and technology to deliver leading-edge, future-resilient solutions—and puts your tax team at the forefront of your company’s next financial and/or business model transformation. Let’s dive in.

Step 1: Assess your organization’s current tax environment

How are the teams, systems, and processes within your finance ecosystem interacting with one another? What in their environment is helping them flourish? What is impeding their growth? Assessing the current state of your organization’s tax function is a critical first step in building a case for identifying opportunities to take advantage of available tax technologies, and ultimately, to build a case for a tax-inclusive financial transformation strategy.

At this stage, tax teams should not only define the need for a technology-enabled strategy, but also gain buy-in and support from leadership and other stakeholders on a tech-enabled roadmap that supports their tax function. Once that support is secured, tax teams should consider the following to position themselves for a thorough and insightful assessment:

Step 2: Build your tax technology strategy

The development of a tax technology strategy allows companies to explore greater utilization of the people and technology that form the backbone of their tax departments. The role of Finance and IT departments should also be a consideration in the process of strategy development. Exploring Generative AI use cases in your tax transformation to enhance real-time data interaction for faster calculations and critical technical insights may be vital. This ensures that your organization’s tax data and reporting needs—current and future—are being addressed by tax transformation.

Your tax technology strategy should include a transformation roadmap, which conforms to organizational needs, delivers recommendations, and defines change management and roadmap expectations. The roadmap should:

• Center around process automation enabled by Gen AI to meet data needs that set organizations up to effectively respond to the dynamic environment of regulatory compliance;
  
• Document technology recommendations and infrastructure-related solutions;
  
• Share opportunities for advancing and optimizing all the different facets of the tax function;
  
• Define a strategy for managing the operations, resources, and budgets for tax departments for enabling technology;
  
• Identify and solve for any gaps in end-to-end business processes; and
• Communicate the impact of the tax technology transformation on upstream processes.

Your roadmap should also serve as a guide for talent and resource enrichment. One of the most significant changes to the tax function in the last 10-15 years has to do with the overall skillset requirements of individual tax teams. What was once a team comprised mostly of finance and tax professionals has now evolved into a multidisciplinary unit which also includes people with STEM-focused backgrounds—technology and data analytics, for example—who are coming together with finance professionals to support the tax function.

This is one of the most impactful ways organizations can look to improve the overall efficiency of their financial ecosystems. Through this skillset diversification of tax teams, organizations can realize a talent pool that is less focused on manual processes and more focused on leveraging the available technologies to uncover leading-edge insights that deliver the most value to the organization.

Step 3: Execute and optimize

The implementation timeframe of a successful tax transformation strategy can vary greatly and is dependent upon several factors, such as the size, the technology footprint, and countries of operation. Deloitte Tax LLP has found that a multi-year timeframe is required for medium to large organizations undergoing end-to-end financial transformations. This timeframe is sufficient for the full implementation of the roadmap across all functional teams and geographies. During this time, organizations should look for support in guiding change management across the affected functions and teams, and executives should look for support in thinking through challenges and assessing talent availability within their tax teams.

When roadmaps are implemented efficiently, organizational leadership should realize a tax function that builds upon the strength of its people and tech to deliver more valuable, future-focused solutions. And when tax teams have implemented process automations, have put the right set of environment controls in place, and have seamlessly integrated their data requirements into the larger finance transformation, then individual team members may find that they have far more time at their disposal to complete analytical, insight-rich work with a higher return on investment, instead of simply collecting data and sharing it with tax and government authorities.

Further value should be seen in the degree to which your overall transformation is being realized because of the early integration of tax processes and requirements. Oftentimes, organizations may need to undergo a reengineering of processes simply to ensure that tax considerations are built into the process from beginning to end. A well-developed, well-executed roadmap can position such processes for proper integration into the larger financial system from the start.

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