Three steps to take
1. Close the digital gap
The digital gap is increasing risks exponentially for tax functions that don’t invest in new technology. There is a wide range of digital tools that can be customized to suit businesses’ needs. These tools, including robotic process automation, artificial intelligence, blockchain, cloud solutions, data lake development and business intelligence innovation, have applications well beyond meeting tax filing obligations and can use tax function data to deliver insights and improvements to the entire business.
2. Deliver the best in class and best in cost
Building a modern tax function is not just about making technical improvements; businesses must focus on putting the right people with the right skills in the right places. To accomplish this, companies need to first evaluate their current tax function and then determine their ideal target operating model.
As part of this analysis, businesses must decide which activities should be treated as best in class and which should be best in cost. Companies should explore functional outsourcing as a way to become more effective and efficient in managing their tax function.
3. Prevent, manage and resolve tax disputes in an efficient and cost-effective manner
In today’s fast-moving tax environment, it is critical that businesses adopt a proactive and globally-coordinated approach to managing tax that enables them to timely identify potential areas of dispute and resolve — or at least narrow the scope of — the issue as quickly as possible.
To minimize the impact of exams and audits, businesses should evaluate their current processes and controls to identify, and develop a plan for ameliorating, any weaknesses. Further, businesses should invest in the right technology and digital tools so that they can improve the accuracy and consistency of data as much as possible.
Keep up with technology
As anyone with an outdated device knows, keeping up with technology is a never-ending and sometimes costly task. It is nonetheless essential, particularly when being up-to-date is critical to avoiding disruption in business. Tax departments’ struggles to catch up with tax authorities in the digital space has been a perennial theme of the EY Tax Risk and Controversy Survey. But the emphasis in the 2017 rendition on compliance shows that the technology gap is now an acute concern. Businesses must make digitalization a priority if they intend to mitigate tax risk in the years to come.
Businesses’ top areas of tax operations and controls focus in the next two years:
- Effectiveness and efficiency of GCR
- Cash flow and repatriation
- Tax audit and controversy management
- Management of the ETR
- Strategic business transactions
- Internal control and remediation projects
- Adjusting to new digital requirements with process or technology (e.g., country-by-country reporting; electronic filing changes in countries such as Mexico, Brazil and Spain)
- Management of tax function operating costs