The challenges of corporate tax departments
Today's corporate tax departments face myriad risks and challenges, including: an uncertain regulatory landscape; talent shortage; vulnerable supply chains; image and reputation risk; Difficulty taking advantage of technology.
o better understand the challenges facing the corporate tax department, KPMG surveyed 126 chief tax officers (CTOs) from large companies in the fall of 2021 and compiled their views in its 2022 Chief Tax Officer Perspective .
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The challenges of corporate tax departments
When asked which tax risks pose the biggest threat to their companies' growth over the next three years, more than half of CTOs chose talent .
Greg Engel, KPMG's vice president of tax, believes that number would be even higher if the survey were conducted today .
The challenges for corporate tax departments preceded the pandemic, deepened with it, and remain one of the biggest issues today.
" There are still a lot of people leaving their jobs and the profession. If you go to college campuses and talk to professors, you'll hear that fewer and fewer people are entering the accounting profession, and that salary inflation could be one reason why Competitive compensation is part of the solution, but the work environment is arguably more important .
Many people have been drawn to public accounting for the opportunity to work closely with colleagues with shared interests and goals, and that has been largely lost with remote work .
Anything a company can do, safely , to make their people feel like a valued part of a team, part of something bigger, will go a long way ," says Engel.
Extension of responsibilities
Amid labor shortages, demands on corporate tax professionals have intensified, the KPMG study notes.
" In today's complex and changing business and regulatory environment, tax departments are being asked to do more with less, produce results faster and unlock value in new ways. Crunching numbers and preparing spreadsheets is no longer enough , tax professionals are now expected to collaborate across functions, understand business strategy, and contribute to business decision-making , which requires more than just technical tax knowledge ."
One of the latest KPMG studies called: “ Tax Reimagined: Perspectives from the C-Suite ” confirmed that C-suite executives want their tax departments to provide data analysis and strategic guidance along with tax and accounting expertise.
75% of these leaders , however, said their tax teams lack the right mix of skills.
A multi-talent strategy emerged from the two surveys:
- Upskill current staff: Nearly 60% of CTOs said they are increasing training and retraining of their current team members.
- Inclusion of technology solutions: About 40% of respondents revealed that they are recruiting tax technology specialists or technology experts who can learn about tax.
- Specialized Service Outsourcing: 66% of senior-level executives say that, in the past year, they have opened up to the possibility of outsourcing to supply their tax departments to keep up with advances in tax technology.
" There is a great desire to make better use of technology and data in the tax department and that desire comes not only from the head of tax, but also from the people they report to" ; says Engel.
Regulatory risk and data analysis
Another challenge facing corporate tax departments is the volatile regulatory environment, which many CTOs defined as their departments' top risk .
In fact, more than 46% had said they expected international agreement to be reached on one or both parts of the Organization for Economic Co-operation and Development (OECD) effort to address the challenges for corporate tax departments stemming from the digital economy.
The pillars of the initiative proposed:
- Pillar 1: would allow authorities to collect taxes from companies in the jurisdictions in which they sell products and services, even if those companies lack a physical presence.
- Pillar 2: would impose a global minimum tax to potentially discourage companies from moving operations to lower tax countries.
" These initiatives could have broad implications for the future tax landscape, with potential impacts on the tax profiles, operations and reporting of multinational organizations ," the KPMG report says.
It is unclear how these complex international initiatives will play out, and companies often lack the data analysis needed to model the impact of proposed tax laws, Engel explains.
As a result, CTOs are unable to provide their companies with clear guidance to inform strategic planning.
" Uncertainty weighs on the tax department because the other parts of the organization want to go ahead and do what they have to do, but they feel that the tax department can't give them what they need, which is certainty," adds Engel .
the technology divide
KPMG's “Tax Reimagined C-suite” survey found that corporate tax teams often fall short of leaders' expectations when it comes to capturing and analyzing data and modeling financial results.
And two-thirds of those surveyed in the CTOs Outlook report acknowledge that their teams spend more time collecting and preparing data than conducting analysis .
Responding CTOs say they will focus future tech spend on:
- 79% in data management, extraction, loading and transformation tools.
- 60% in enterprise resource planning (ERP) software, source systems and data warehouses (60%).
- 50% in collaborative tools.
- 38% in BI or Business Intelligence (Business Intelligence), modeling and advanced analysis.
High-level executives say they know that tax data can create valuable insights, according to KPMG research. But at the same time, most admit that their organizations are not yet using tax data to:
- respond to audit inquiries;
- generate information on spending;
- forecast tax rates;
- identify opportunities to improve the bottom line or inform decisions on mergers and acquisitions.
The study identifies several systemic reasons for this, including the inability to share data across the enterprise, concerns about data accuracy, resource issues, and a lack of analytical tools and skills.
Still, most executives say they don't intend to invest heavily in technology to fix the problem due to concerns about:
- return on investment (ROI);
- data literacy within the company;
- the insufficient fiscal technological talent available.
" Companies know that they need more data and technology, but given the pace of change, they have come to the conclusion that they cannot keep up if they implement these tools themselves ," concludes Engel.
As you will see, the trend is for technology to be the differential to face the challenges of corporate tax departments and turn them into centers of value generation.
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