8 minute read 23 Jan 2023
Aerial view of George Washington bridge

Why competitive private businesses are transforming their tax function

Steven Shultz

Global EY Private Tax Leader

Service mindset. Passionate supporter of perfect careers. Builder.

Dave Helmer

EY Global Tax and Finance Operate Leader

Helping companies reimagine the tax and finance function.Speaker. Passionate runner. Husband and father of seven.

8 minute read 23 Jan 2023

For private businesses transforming their tax functions at a time of global flux, co-sourcing may be a valuable part of the solution.

In brief   
  • Private companies are facing many of the same transformation challenges for their tax and finance functions as publicly traded organizations.
  • External pressures on private companies can disrupt ambitious goals for adding community, employee and customer value and impede financial growth.
  • Tax operations effectiveness is viewed as an “enabler for value and competitive advantage” in private companies, survey finds.

Private businesses around the world are facing new pressures in the tax and finance domains that, if unaddressed, could disrupt or even undermine their ambitious goals for adding community, employee and customer value as well as robust financial growth.

The ability to deliver tax and finance functional efficiency is particularly important for private businesses because they are more likely than public companies to view tax first and foremost as an enabler for value and competitive advantage, according to the EY 2022 Tax and Finance Operations (TFO) Survey. Yet the survey found that private companies, like organizations more broadly, are seeking to balance value, manage risk and reduce costs even as they struggle with retaining and transforming their talent, keeping pace with legislative and regulatory change, and future-proofing their technology and data. This is putting enormous pressure on the tax and finance functions.

“Private businesses are telling us that, for tax and finance functions in particular, this is all creating a level of disruption and complexity that’s hard to manage effectively,” says Ryan Burke, Global EY Private Leader. “Many are struggling to marshal the required skillsets and platforms that the future demands.”

As a result, many private businesses are examining how they can meet these disparate challenges that are pulling their tax and finance functions in multiple directions.

According to the survey, a third of respondents working for private businesses said being an “enabler for value and competitive advantage” was their highest priority for the tax department’s relationship with their enterprise’s growth ambitions. That was 12 percentage points higher than “social responsibility” and an “obligation and risk to be managed,” which polled at 21% each as the top choice for private companies.

Perhaps because so many private companies see tax operations effectiveness as providing a competitive advantage and because 81% of private companies “agree” or “strongly agree” that their boards and C-suite view the tax function as a strategic partner for the business, some 90% of private businesses are considering co-sourcing some tax functions to help fulfill those expectations. 

“Tax departments today are expected to be engaged and bring insights to the business,” says Desmond Teo, Asia Pacific EY Private Tax Leader. “This is harder than ever with so many demands; so the more we can do to encourage tax professionals to really focus on how tax affects the enterprise instead of performing repetitive and rudimentary tasks, the more value they will have.”

To be sure, for private enterprises, these insights help the business deliver on unique characteristics and goals, including owners’ purpose and legacies. For instance, while just 21% of private businesses ranked “social responsibility” as their top priority for the relationship between tax and their business growth ambitions, some 29% ranked it second; that 50% combined total actually exceeded the 49% who ranked “value and competitive advantage” as their No. 1 and 2 choices for that relationship.

The road to transformation

According to the EY TFO survey, 76% of private business respondents say they are already taking action due to deficiencies in their current operating model.

As private businesses create that laser focus on the tax and finance functions, many are realizing that there is a real balancing act when it comes to achieving business objectives while dealing with a distinct set of obstacles.

According to the survey, 36% of respondents said that the largest barrier to delivering their tax and finance functions’ purpose and vision is a lack of a sustainable plan for data and technology; 29% naming an inability to identify, evaluate and respond to legislative and regulatory change; and 27% an inability to hire and retain required talent.

  • Image description

    This is a chart showing the top three reasons respondents gave as being the largest barriers to them being able to deliver their tax and finance functions’ purpose and vision.

The technological imperative

Given the pace of change in the technology landscape and the art of the possible for data analysis and reuse, it is understandable that so many private businesses see this as a major focus. Most transformation agendas in this domain rely heavily on technology and data innovation to power benefits.

“Tax and finance functions are facing specific challenges in areas such as emerging digital tax filing requirements, demands from tax authorities around data, and the need to do everything at an increased speed,” says Victoria Price, EMEIA EY Private Tax Leader.

The reality is that the use of leading technology is going to become increasingly critical for driving quality, value, and efficiency – and it will require investment and bold moves.  According to the EY TFO survey, private businesses estimate they will spend an average of US$3m on tax technology alone over the next three years.

Meanwhile, even as they make incremental investments in technology, these same businesses are under increased pressure to reduce costs, with 94% planning to reduce the tax and finance functions’ budget over the next two years.

Cost reduction


Of respondents plan to reduce the tax and finance function budget

Regulation and talent

This comes at a time when disruptions in the tax agenda seem to be accelerating as the world tries to move beyond the pandemic. With the OECD’s BEPS 2.0 project expected to come into force in 2023 as well as the EU’s anti-tax avoidance directive (ATAD 3) in 2024 – along with other changes to tax regulation – the reporting and transformation requirements is only going to become more onerous for private businesses.

According to the EY International Tax and Transfer Pricing Survey 2021, 76% of respondents say they are being challenged by the sheer volume, pace and complexity of global tax reforms.

Furthermore, 62% of respondents to the survey noted that complying with emerging digital tax filing requirements will further increase the workload for the tax and finance functions. The cost of responding to these new obligations will be considerable and will continue to increase. Private business respondents indicate they expect to spend an average of US$11m over the next five years simply to comply with these emerging digital tax filing requirements.

Perhaps more fundamental than technology investments and changing regulations is the workforce of the future needed to support the tax and finance strategy and functions. Across the globe, we have seen the “Great Reshuffle” of talent with employees demanding new forms of flexibility and increased remuneration. According to our TFO survey, 94% of businesses expect that they will need to upskill their tax and finance personnel to address new skills resulting from emerging data, process, and technology requirements over the next three years.

“Finding the right talent is one of the greatest challenges that businesses face today,” says Jim Givens, Americas EY Private Tax Leader. “Many businesses are looking for creative, sustainable ways to access the finance and tax skills of others to supplement their in-house functions.”

Why co-sourcing is increasingly part of the solution

Today’s private businesses continue to grow at pace – working hard to stay focused on strategic ambitions and purpose while addressing unprecedented disruptions that impact critical tax and finance functions. Many of these businesses have already been highly proactive adapting internally and pulling the levers in their control to transform internally. Yet the challenges and opportunities continue to evolve, and the pace of change is difficult to match.

While some private businesses seek to build internal capabilities, more and more are responding to these pressures by turning to strategic co-sourcing collaborations to drive value, manage risk and support transformation. According to the EY TFO survey, the co-sourcing trend is being driven by a need to support comprehensive transformation and a balance of three significant benefits for the in-house tax function: reduced tax risk profile (39%), reduced costs (33%) and increased value (28%).

The EY TFO survey shows that 74% of private businesses are more likely than not to co-source select tax and finance activities over the next 24 months. For many, a hybrid approach combining internal and co-sourced activities is an effective option. Either way, businesses that have undertaken such transformations may be better positioned to redirect resources to focus on the most strategic finance and tax issues.

“Choosing where to focus time and investments can be the most significant – even overwhelming – aspect of today’s tax and finance functions strategy and transformation” says Jim Hunter, Global EY Tax Platform Leader. “Still, innovations in the marketplace offer unprecedented opportunities for those that can access leading practices. Now is the time to reevaluate strategy and focus to reach the right balance for supporting business growth. This could mean co-sourcing activities that are necessary but perhaps non-core or where the required investments and capabilities are difficult if not impossible to sustain alone.” 

Four steps to a successful transformation for private businesses

Private businesses need a transformation strategy that is holistic, flexible and has the scope to evolve and adapt to changing talent, regulatory and technology landscapes. The following steps can act as a guide to successful and robust transformation:

1. Re-evaluate the operating model

Even if transformational changes have been made to the operating model, private businesses should make continuous assessments to stay up-to-date and to identify gaps particularly in people, methods, and technology.

2. Determine what stays in-house

In-house delivery may be appropriate for high-value activities such as analyzing or managing tax controversy. However, for this to be effective, a degree of internal transformation to upskill and update existing people, data processes and technology will be required.

3. Decide what to co-source

It may be more advantageous for private businesses to co-source some activities, especially those that are more routine, highly repeatable or data-driven – such as completion of tax returns, regulatory filings and data collection.

4. Consider a hybrid approach

Some private businesses will see the value in a hybrid approach where they continue to own and staff some tax and finance processes and activities, while co-sourcing others. This approach can empower tax and finance functions to become a value-added partner to the business by giving them space to focus on activities that improve the bottom line. 


An EY survey finds private companies are more likely than public ones to view delivering efficient tax and finance functions as giving them a competitive advantage.

Yet they face many of the same external pressures as publicly traded ones, including keeping up with the pace of legislative change, finding and retaining the right talent, and ensuring they have the right technology to function efficiently.

Transformation of the tax and finance function for private companies can help deliver the service that owners expect. This, in turn, can help private businesses meet their ambitious goals and achieve robust growth.

About this article

Steven Shultz

Global EY Private Tax Leader

Service mindset. Passionate supporter of perfect careers. Builder.

Dave Helmer

EY Global Tax and Finance Operate Leader

Helping companies reimagine the tax and finance function.Speaker. Passionate runner. Husband and father of seven.