The growing global demand for financial transparency and the evolving scope of digital technology are fundamentally transforming—and empowering—the tax profession.
A Deloitte survey of more than 300 senior tax professionals and finance executives in 10 countries, including interviews with leaders at multinational companies, found widespread agreement that tax professionals need to rethink their data processing systems, their compliance strategies, and their roles within their organizations.
The tax professionals surveyed agreed that the driving force for change is transparency, including transparency required by new regulatory requirements and transparency enabled by technology. Tax authorities increasingly want and have access to more information perhaps than ever about who pays taxes, how much they pay, and when and where taxes are owed. The combination of new regulations and digitalization is having a profound impact on tax functions.
Many tax leaders expect this dynamic to intensify under the global tax regime initiated by the OECD’s Pillars One and Two. In the survey, 70% of participants predicted that revenue authorities will have increasingly more direct access to their systems over the next three years. As a result, about 75% said they expect to spend more time ensuring their systems are configured for that need.
While technology creates risk, it also offers solutions that can deliver tremendous benefits. The pressing need for more access to enterprise data to support tax functions is elevating the role of tax professionals within their organizations. Tax leaders can succeed in the evolving tax landscape if they are empowered to make their voices heard in discussions about investment decisions for new technology and data initiatives.
Well over half—63%—of survey respondents said they have autonomy over tax technology strategy, and 78% percent said they had a role in developing the next-generation, cloud-based enterprise resource planning (ERP) systems for their enterprise.
The adoption of advanced ERP is delivering multiple benefits. Of those who have an advanced ERP, 60% said they have a “very strong” ability to conduct sophisticated scenario modeling relating to the OECD Pillars One and Two changes. Larger majorities expressed confidence that ERP upgrades would address specific tax challenges: 89% believe they will more easily adjust to evolving filing and reporting demands; 90% think upgrades will help solve data quality issues; and 92% predict enhanced straight-through data processing for tax purposes.
Other benefits from this transformation may include fostering collaboration between tax and finance that facilitates reporting and other tax processes by standardizing operational data. In addition to reducing the risk of penalties and tax adjustments, this shift can provide valuable insights and strategic guidance for other parts of the enterprise. Further, data transformation creates opportunities for additional automation in downstream tax processes.
Numerous tax leaders anticipate additional benefits from the use of artificial intelligence (AI) and machine learning as part of their tax transformation. Three-quarters of survey respondents said they are likely to use those technologies in the next two years. Many also acknowledged that they may need help to expedite and execute this transition.
Overall, tax leaders reported having more options for deploying resources, reducing operating costs, while optimizing the use of in-house teams. A large majority, 80%, said they are evolving toward an operating model that combines outsourcing, in-sourcing, and co-sourcing of tax functions; 79% plan to outsource functions that are not core to their long-term tax strategy.
There is no single path for achieving successful tax technology transformation. Decisions about operating models should start with an honest assessment of in-house capabilities and priorities. Outsourcing also can provide solutions to internal talent gaps as well as benefits from leading technologies.
Whatever path a company chooses, the benefits of tax transformation are often well worth the effort. Effective tax transformation can reduce risk, improve compliance, and position tax professionals to focus on delivering rich insights and providing strategic support to the business. By embracing the drive toward transparency and transformation, tax leaders can gain the added benefits that flow from opportunities to deliver even greater strategic value to their organization.
This article does not necessarily reflect the opinion of The Bureau of National Affairs, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.
Emily VanVleet is the Tax Operate Transformation Leader for Deloitte Tax LLP. With more than 20 years of experience in tax consulting, strategic process design, and practical approaches to tax transformation, VanVleet is known for designing and delivering tax solutions that allow her clients to confidently and successfully streamline and automate to intensify value, mitigate risk, and increase efficiency in tax operations.
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