When taking a fresh look at new technology capabilities and related operating models, chief financial officers (CFOs) may find that they can have it all – a high performing, efficient tax department that’s tightly integrated with finance and the rest of the organisation.
By Mark Freer, digital leader for Deloitte Africa Tax & Legal
An unprecedented number of regulatory and tax policy changes are underway around the globe, presenting organisations with significant challenges–and opportunities–for tapping tax earlier and more often when key business decisions have to be made.
Failure to modernise may not only leave a company lagging when it comes to compliance, it may also see the organisation outpaced by nimbler, tech-savvy competitors. Yet, many tax professionals tell us their companies are simply not set up for this new reality with finance leaders continuing to respond in predictable ways. They are hiring more people, sourcing temporary help, adding point technology solutions and outsourcing parts of the process.
While this has worked in the past, the evolving digital economy is continuously unleashing new competition and innovative business models, both of which can create significant tax planning pressures, but also opportunities. With 50 percent fewer tax accounting graduates and a big chunk of the tax workforce nearing retirement, there aren’t nearly enough experienced tax experts in the market today.
Deloitte’s Crunch Time 9: Tax in a Digital World guide shares insights on how new data modelling tools make it possible to deliver valuable tax insights on differing financial scenarios in real time. This essentially means that business leaders will receive the benefits of these insights before they have to make their decisions. Before this can happen however, tax needs to modernise along with the rest of the enterprise.
Companies need cognitive tools, bots as well as other technologies (or service providers deploying those solutions) to assist with improving efficiencies in their work and that requires investment that will lead to new ways of working for future relevance.
Modernised tax is a move from being mostly a compliance function to a high-value planning and reporting function. Digital tools and talent churn through scores, or even hundreds of scenario models, to determine their after-tax financial implications. This type of data modelling combines the organisation’s own real-time financial information with the latest tax laws and regulations to guide decision-makers through the best options for action.
The guide suggests three things that will be visible in an organisation once the shift to a modernised tax department occurs. They are reimagined processes; redefined talent and technology enablers.
We see reimagined processes when reconciliations are automated and managed on an exceptions basis. Tax analyses and evaluates the discrepancies while optimising the reconciliation of source data to the general ledger. Touchless automation removes manual reconciliation and accounts payable clerks no longer have to key in tax codes manually or make tax determinations on the fly.
Redefined talent leads to tax staff being freed up to focus on tax planning and other high value-add activities. Tax managers generate targeted business insights rather than generic ones, while staff monitor data quality as a key performance indicator.
Tax modernisation is also about risk management. In the face of growing complexity, technology enablers such as automation and advanced analytics assist tax teams to efficiently grind through the data and scenarios required for effective tax planning and reporting. Real-time layers of data proactively identify rule exceptions, improving reliability with machine learning. Visualisation and analytics from an integrated tax data warehouse enhance the indirect tax process.
The business case for tax modernisation is easy to make for almost any global enterprise. Implemented correctly, it enables better management of the global effective tax rates and with automation, you may be able to effectively apply for tax rebates and reduce cash leakages, such as VAT overpayments.
Yet even with a clear business case, your tax department may not push for needed investment as aggressively as other functions might. Tax departments are busier than ever, and many are falling behind, with little bandwidth to consider these improvements. If you’re the CFO, nudge tax along. Even when there’s a great tax leader in place, CFOs need to champion modernisation.