10 minute read 25 May 2021
women writing on white board

How banks are reimagining tax and finance functions to deliver value

John Thomopoulos

EY Global Financial Services Tax and Finance Operate Leader and Global Banking & Capital Markets Tax Leader

Helping financial service leaders rethink and transform their tax and finance functions. Passionate about mentoring, education, and the arts.

Ethan Schiffman

EY Americas Financial Services Tax and Finance Operate Banking & Capital Markets Leader

Helping banks tackle their most challenging tax matters for almost 25 years. Passionate about teaming and promoting inclusiveness and empowerment. Devoted husband and father. Avid cyclist.

10 minute read 25 May 2021

Regulatory change, cost pressures, and technology are driving banks to transform their tax and finance functions, says EY’s TFO global survey.

In brief
  • Banks face a multitude of internal and external pressures to strengthen their operations – something that looks set to continue for the foreseeable future.
  • Leading tax and finance functions have an opportunity to revolutionize the way they work and add long-term value across the wider organization.
  • Capitalizing on data and digitalization will be key, as will be managing cost and risk, and adopting an effective sourcing strategy.

As banks strive to remain competitive, deliver better financial results, and meet rising regulatory requirements, tax and finance leaders face the unrelenting challenge of having to do more with smaller budgets and reduced headcounts. Now, as banks begin to emerge from the shadow of the COVID-19 pandemic, it’s both a critical and ideal time for their tax and finance functions to embrace change and accelerate the transformation of their operations.

“Our banking clients are living through a perfect storm,” says Ethan Schiffman, EY Americas Financial Services Tax and Finance Operate Banking & Capital Markets Leader. “Across the globe, the pace and scope of legislative, regulatory and business change have increased significantly, while tax and finance functions face continuing pressure to operate on tighter budgets to refine their global location strategy, and to come up with new ideas to carve out a competitive advantage.”

However, many tax and finance functions are struggling to meet these challenges and are not future-proofing themselves against those that will come tomorrow. It’s only logical, then, that banks’ tax and finance functions should be looking to transform their operating models — to enable them to work in the nimble, scalable, well-controlled way the future demands.

According to the 2020 EY Tax and Finance Operate global survey, 98% of banks indicated that they are making changes to their current operating model. The tax and finance functions have a major role to play in this transformation. By becoming a true, strategic partner working in step with the broader business, it can help the organization differentiate itself, seize opportunities and grow.

“The critical question for tax and finance functions is how best to design and implement lasting change that delivers significant sustainable benefits,” says Schiffman. “Enhanced controls, increased efficiency, decreased cost, agility and operational effectiveness are the new benchmarks for the tax and finance functions.”

Driven by data

A key to driving successful transformation is data and technology. Indeed, banks surveyed by EY overwhelmingly indicated that the lack of a sustainable plan for data and technology is, by far, the biggest barrier to delivering a tax and finance functions’ purpose and vision.

All too often, different functions within a bank fail to share data in the most efficient, effective way possible. This challenge is magnified for tax and finance functions, who need to focus on data sources and transaction-level information to comply with global tax rules.

Many banks’ tax and finance functions use a tax reporting package, consolidation ledger, or disconnected spreadsheets as a primary source for tax data, necessitating a significant investment of time and effort in various data cleansing activities. As the percentage of time devoted to data collection, cleansing, and manipulation increases, these functions struggle with reduced efficiency and increased risk, ultimately compromising operational effectiveness.

“When it comes to data, there is often a gap between sources and uses of information,” says Schiffman. “For instance, financial accounting data often isn’t easily able to suit tax requirements without intervention. Unless the tax and finance functions think and act strategically about the tax data supply chain, information created for one purpose may be used for another purpose in a way that inadvertently introduces incremental risk.”

As the global operating environment continues to shift, internal and external stakeholders alike are increasingly demanding ever-increasing volumes of information that must be timely, accurate, and complete. As such, the value of a comprehensive data and sustainable technology strategy cannot be overstated, as too much time and resources are consumed in simply trying to aggregate and reconcile information.

With tax becoming more real-time and transaction-based, banks’ tax and finance functions should actively participate in the design and governance of financial systems to help ensure data quality through correct processing at the time of transaction. A methodical and accessible central ecosystem – including a central data lake where information is sourced, acquired, cleansed, and structured to ensure it is constantly up to date and always at hand – forms a critical part of high-performing tax and finance functions.

“The data lake gives you all the individual data points you’d find in a database, from various sources — the market, business transactions, investments, and subsidiaries – plus the data the organization generates itself in the course of its work,” says John Thomopoulos, EY Global Banking & Capital Markets Tax Leader.

“By being cleansed and always updated, every person in the workflow can be sure the computation they’re picking up is the correct one. The data lake is deeper than the typical database because it preserves historic reporting and its results.”

By adopting this approach, the tax and finance functions become much more operationally efficient and empowered – creating cost and time savings that can be redeployed elsewhere across the organization, while driving better planning, analytics, and business decisions. It also positions banks to comply with emerging digital tax filing requirements, which will only increase the workload of their tax and finance functions.

Doing more with less

The benefits of optimizing data and technology are key, as one of the most critical considerations for any tax and finance function now is the pressure to reduce costs without compromising quality.

“As banks grow, they can’t afford for their cost ratios to match their revenue growth ratios,” says Thomopoulos. “Just because a bank adds another 100 legal entities and now has to prepare several hundred (or more) additional tax filings, that shouldn’t then cost an equivalent amount for each one. This is a major consideration.”

Indeed, according to the EY survey, 87% of banks have a plan to reduce the cost of their tax and finance function over the next two years. That’s higher than businesses across all surveyed sectors (79%). And, their average target cost reduction is 7.7%.

This points to the complexity such organizations face when supporting the broader business. And, it leads to the second key tool for tax and finance transformation – the need for digitalization.

The digitalization of tax administration has upended the way business information is shared with tax authorities, and tax and finance functions need to be every bit as current with the latest technology as the governments to which they report. As regulators around the world embrace digital transformation, banks are being forced to respond in kind, boosting their own readiness.

Unsurprisingly, 86% of banks in the EY survey anticipate an increase in the workload it takes to comply with emerging digital tax filing requirements. They also estimate they will spend $9.2m on digital tax filing compliance over the next five years, compared to $7.7m of the overall sample.

“There’s a drive to become as real-time as possible with financial reporting,” says Jake Berman, EY Global Banking & Capital Markets Tax Resident. “Take the month-end close. That process used to take a month, so the tax and finance team was always a month behind. The trend now is to get to the close as quickly as possible. And, this time compression further magnifies the expectations placed on the tax and finance functions.”

Here, too, banks face significant challenges. According to the EY survey, banks have nearly twice the number of enterprise resource planning (ERP) platforms as other companies – 16, versus nine for the overall sample – reflecting the complexities their tax and finance functions are faced with, as well as the legacy of previous industry consolidation. This creates more challenges for obtaining timely and accurate data, which further affects the ability of tax and finance to really shine – by reducing risk and adding value to the business.

Rethinking the model

In order to drive the required transformation, and to meet the host of challenges they face in supporting their banks’ businesses, forward-thinking tax and finance functions are now re-examining their operating models.

This involves an evaluation of every facet of their operations, to decide which tasks and processes should be performed in-house, and where there are advantages to partnering with a third-party service provider. In response to this challenge, 61% of banks surveyed plan to co-source some critical activities in the next 24 months in order to add value, reduce risk and decrease cost.

These decisions are best informed by asking a series of questions:

  • Which processes and activities within the organization are no longer required? If the rationale behind a task is that it’s simply always been that way, now is the time to evaluate whether it is still necessary.
  • Of the remaining activities, which are core to the tax and finance functions’ mission? These are the tasks that drive competitive advantage, manage risk or create value for the organization, for example. This includes providing advice to key stakeholders across the business and senior management, engaging with tax authorities and other regulators, and value-added tax planning. Here, the function needs to be best-in-class.
  • Is any given task routine, relying more on operational efficiency than technical tax sophistication? This may include repetitive, broad-brush tasks such as the preparation of reports, tax returns, or components of financial statements, for example. Here, banks may decide it’s better to co-source activities that can be performed at lower cost by a third party that is focused on that task and has the scale to succeed.
  • What is the right mix for a bank’s tax and finance functions? What are the opportunities for a managed service provider to take on these best-in-cost tasks? And, where should that provider help the organization itself transform? For these latter tasks, an experienced third party can help the organization achieve a best-in-cost structure, enhance its process and control framework, and rethink its location strategy, while offering comprehensive technical support.
Taking decisive action

As to which sourcing model is the best, different solutions will suit different banks. Some opt for a one-size-fits-all approach, adopting the same sweeping model across every department. Others apply a certain model to particular groups. And for some, it’s a matter of phasing in co-sourcing support across the business in stages. “There’s no right or wrong approach,” says Thomopoulos.

There is, however, a right or wrong when it comes to action. With all the options available, companies can easily fall prey to “analysis paralysis.” Yet inertia, here, is the enemy. Tax and finance functions that delay transformation become too expensive and compromise their ability to operate effectively as a control function, thus increasing their costs and risk, and reducing efficiency.

Ultimately, they jeopardize the bottom line, by failing to realize their full potential as a true partner to the business. And, this can have serious consequences.

“Nobody wants change, but those that resist it will wake up one day and realize everything is gone,” says Thomopoulos. “Here, conquering the centralized data model is a huge, decisive step in transformation. That’s what brings efficiencies and accuracy and adds value. The more accurate and timely data you have, the better business decisions you can make. And, that will result in a better company.”


Banks continue to face pressures from clients, shareholders, regulators and tax authorities. Transformation is a necessity, not an option, and the tax and finance functions have a major role to play in delivering organization-wide change. Central to that is optimizing data and digitalization and operating as a valued partner to the broader organization.

About this article

John Thomopoulos

EY Global Financial Services Tax and Finance Operate Leader and Global Banking & Capital Markets Tax Leader

Helping financial service leaders rethink and transform their tax and finance functions. Passionate about mentoring, education, and the arts.

Ethan Schiffman

EY Americas Financial Services Tax and Finance Operate Banking & Capital Markets Leader

Helping banks tackle their most challenging tax matters for almost 25 years. Passionate about teaming and promoting inclusiveness and empowerment. Devoted husband and father. Avid cyclist.