From supply chain challenges to shifting workforce dynamics, businesses face various operational challenges in 2023. For many, this requires maintaining a high-wire act of driving value while at the same time managing risk and reducing overheads. Add a struggle to retain and transform talent into the mix, keep pace with legislative and regulatory change, and future-proof technology and data… it’s no surprise that the tax function is under enormous pressure.

Delivering efficiency in the tax function is essential for businesses. As a result, many are examining how to reshape their tax function to achieve their business objectives while negotiating a shifting set of obstacles. For most, the successful transformation will require tax functions to focus on three main areas: technology and data, regulation and legislation, and talent.

Technological & Data

COVID-19 and the overnight shift to home working made it plain that seamless access to data is crucial in delivering the transparency required in a fast-moving tax landscape. Today, there is a growing appreciation that robust data analysis can bring significant added value alongside efficiency – particularly when better projecting the tax implications of future business decisions.

While digital transformation can undoubtedly be expensive (often putting it at odds with pressure to reduce costs), shrewd investment can pay dividends – arming the tax function with actionable insights that drive growth.

Regulation & Legislation

Just as the pandemic brought a rapid technological shift, regulation and legislation also underwent significant change as governments worldwide passed major stimulus programmes – often partially funded by temporary tax measures. Today, disruptions to the tax agenda show no sign of slowing as the world moves beyond the pandemic, functions have to deal with an unwinding of temporary policies, and tax reform aimed at achieving fiscal stability.

With the OECD’s BEPS 2.0 project expected to come into force in 2023, the EU’s anti-tax avoidance directive (ATAD 3) coming in 2024, and a host of other changes to tax regulation, reporting and transformation requirements are only going to become more onerous for business.

Talent

Perhaps even more fundamental than shifts in technology, regulation, and legislation is the need to secure the right talent to drive through transformation. Across almost every industry and function, businesses need help attracting and retaining people. Tax is no exception.

The pandemic accelerated many of the trends we saw before the pandemic. As a result, we have seen employees demanding new forms of flexible working and increased remuneration. This comes at a tricky time for tax teams, who will increasingly search for professionals with the right combination of tax, data and technology skills.

Transformation – Points of consideration

Businesses must develop a holistic transformation strategy flexible enough to evolve with the rapidly shifting technology, regulatory and talent landscapes. Here are four ways to help ensure a successful transformation:

• Continually assess your operating model – Even if you’ve already made a transformational change, there’s no time to sit back and admire your handy work. The pace of change means making continuous assessments to uncover emerging gaps in talent, processes, and technology is essential.

•  What is your In-house capability – For high-value activities like analysing or managing tax controversy, you should invest in the capability for in-house delivery. If this is the case, an internal review may be required to assess existing talent, data processes and technology and identify areas for investment.

•  Is a hybrid approach suitable – A hybrid system will be most effective for many businesses. Outsourcing routine, highly repeatable or data-driven tasks will free up time for skilled functions, enabling them to think strategically about activities that can improve the bottom line.

•  Identify where you can outsource – While some businesses will build out internal capabilities, there is a growing trend for outsourcing. As business pressures mount, strategic outsourcing can effectively drive value, manage risk and support transformation. This is particularly true for low-value, routine activities like completing tax returns or regulatory filing. 

Comment – Andre Aust

Head of Tax | Barentz International B.V.

“It’s clear that we’ve become accustomed to the fact that the tax department requires accounting expertise, but today, it’s equally as important to know about technological developments to meet obligations and to optimise opportunities”.