BEPS 2.0 readiness is top of mind for CFOs and tax leaders, survey finds

• 90% of CFOs and tax leaders surveyed expect a “significant” or “moderate” impact from BEPS 2.0, but only 30% have completed an impact assessment
• 51% say they struggle with motivating talent and avoiding burnout
• 95% are more likely than not to co-source tax and finance activities in the next two years

The rapidly changing regulatory landscape is creating a significant challenge for tax and finance departments, according to the latest EY Tax and Finance Operations Survey (TFO). Amid these challenges, tax and finance functions face potential budget cuts due to a turbulent economic environment, while still simultaneously transforming their functions. The survey, which polled 1,600 CFOs, heads of tax and finance professionals across 32 jurisdictions, finds that while a growing number of tax and finance functions are transforming – 96% of businesses compared to 84% five years ago – the pressures faced are becoming more intense and urgent.  

Regulatory readiness deepens challenges

Many large global businesses are bracing for sweeping reforms as governments implement the Organisation for Economic Co-operation and Development’s (OECD)/G20 base erosion and profit shifting (BEPS) 2.0 rules including global minimum taxes under Pillar Two. The survey finds that 90% of respondents expect to experience a “significant” or “moderate” impact from BEPS 2.0, but only 30% have completed a BEPS impact assessment.

Beyond BEPS 2.0, a range of other compliance complexities are putting pressure on tax and finance functions. These include the US corporate alternative minimum tax, green and sustainability taxes, the EU’s Carbon Border Adjustment Mechanism and an accelerating pace of countries converting to e-invoicing. Finally, businesses also face a sharp uptick in formal and informal requests for tax and finance information from authorities.

Marna Ricker, EY Global Vice Chair – Tax, says:

“We are in the middle of an unprecedented overhaul of a century old ‘global tax code’ driven by many factors, including digital, the economy, geo-politics, a movement to green and clean, and much more. Tax leaders need to consider transforming their tax and finance functions by leveraging data and the latest technologies. Those who do will probably have an easier time complying with changing laws and regulations and their tax and finance functions may be better positioned to provide more strategic value to their organizations.”   

Struggling to harness the power of new technologies

Converting tax and finance functions into modern, data-powered operations is being driven by many factors, yet one in particular is a need to be responsive to tax authorities who are increasingly asking for real-time data. Businesses also want their tax and finance functions to provide high-value strategic counsel on the business’s overall direction and to do so quickly and efficiently. However, 48% of respondents cite the lack of a sustainable plan for data and technology is the biggest barrier ​to achieving this vision.

Tax and finance leaders are also skeptical that emerging technologies like generative artificial intelligence (AI) will have an impact on their work. Eighty-five percent state that they do not believe generative AI tools will help drive increased effectiveness and efficiencies within their tax function.  

Dave Helmer, EY Global Tax and Finance Operate Leader, says:

“Gathering and organizing the right data is increasingly critical. Amid the myriad of challenges businesses are facing clean data and the application of technology to that data, is a key tool for organizations to model regulatory changes and achieve accurate compliance.”

Tax departments faced with talent challenges

The survey revealed that tax leaders are grappling with a range of talent issues. Fifty-one percent of leaders say they have moderate to significant struggles with motivating talent and avoiding burnout within the teams. Meanwhile, 63% say their employees will need to augment their tax technical skills with new data, processes and technology abilities in the next three years. And 29% say they do not have enough highly skilled professionals capable of monitoring, evaluating and implementing tax legislative and regulatory change around the world.

Notably, respondents that co-source 25% or less of their workload are more likely to report that they are struggling with these issues than those that co-source higher concentrations.

Co-sourcing surges as a solution

These collective pressures are causing companies to analyze their options for creating modern, agile tax operating models, and co-sourcing with third parties is emerging as a preferred way to achieve this. Ninety-five percent of businesses are now more likely than not to co-source tax and finance activities, a 22-percentage point increase since 2020. Meanwhile, 35% of companies say co-sourcing with a provider who has significant capabilities in data, technology and shared service center delivery is the most important change they need to make to their operating model.

More than half (59%) say the ability to develop their team and provide opportunities to work on more strategic activities is the most significant benefit of partnering with a provider to co-source multi-country tax compliance and statutory reporting activities, while 18% identify cost savings as the biggest benefit.

Helmer says: “All the pressures that initially drove tax and finance functions to modernize will accelerate and intensify further. There may be more legislation, workforce demographics may keep shifting and technology may continue to make breakthroughs, all exacerbated by economic and geopolitical uncertainty.

“Businesses need a plan to have accurate compliance and drive value efficiently.  Data, technology, and global expertise are the heart of those outcomes. And putting the three together leads to the transformation necessary for tax and finance functions to become even more strategic and indispensable business partners.”

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About the survey

The 2023 EY Tax and Finance Operations Survey was conducted by Oxford Economics from April to May 2023.

The double-blind study queried 1,600 executives at more than 1,000 large companies in 32 jurisdictions and across 18 industries, to understand how tax and finance functions are being affected by change.