Competing demands and increasing challenges
In an era of such unprecedented change in the global tax policy landscape with a greater focus on transparency and additional reporting obligations, many CFOs and Tax professionals were already faced with important decisions to be made about managing the complexities of their tax and finance operations.
That was even before the pandemic, the fallout of which has huge implications for organisation’s tax and finance functions, who are now dealing with the many tax legislative and regulatory changes that have emerged over the last year. For example, we have seen nearly 3,000 COVID-related tax law changes offering incentives, relief and support to businesses just in the last year. As Governments start to move to repay the trillions in COVID-related stimulus, raising taxes through further tax law changes and/or increased tax audit activity will be key features. This further complexity of tax law change adds to an already rapid pace of legislative change with Governments seeking to capture more revenue locally from digital services and cross-border commerce.
In addition, the delivery of long-term, sustainable value is growing in prominence across the boardroom, with increasing acknowledgement that the days of measuring success only through financial value on the balance sheet are moving well and truly towards the history books. This focus on sustainable growth and broader stakeholder value requires a fundamental rethink of value delivery, both within the finance function and across the organisation.
Grappling with these competing demands, tax and finance functions have an urgent need to identify efficiencies and cost benefits. Times of change and crisis present an opportunity to do things differently and an impetus to transform. From a tax perspective, the process should begin with a quick but thorough strategic review. This review should be considered in the context of potential broader finance and/or enterprise-wide transformation, and should consider long-term, strategic solutions rather than short-term quick-fixes
One important question to ask is which parts of the tax and finance function your business can sustainably own and operate and which processes should be co-sourced or outsourced to third-party professional services organisations. Even before the pandemic, these were questions CFOs were asking. In our 2020 TFO survey, 98 per cent of large company respondents said they were transforming their tax and finance operating models and 73 per cent said they were more likely than not to co-source some critical activities in the next 24 months.
The role of technology
Next is to consider the role that technology platforms can play. It is not just the ability to support seamless cooperation across global teams, essential though that is. Tax and finance teams need flexibility, such as being able to produce new analytics and reporting when the business pivots. Any technology platform also needs flexibility to allow for periodic updating as global tax laws change and to incorporate new technologies and processes as and when they become available.
As part of their transformation programmes, many organisations are looking to work with professional service providers such as EY to help them understand the technology potential around tax and finance function transformation.
Whether it’s working with our global alliance partner SAP to help tax and finance functions configure and tax optimise their processes and outputs as part of an S4/HANA design and implementation or leveraging our own EY Global Tax Platform and the power of Microsoft’s Azure cloud solution, the potential to drive more efficient tax reporting and compliance processes, manage tax risk whilst also delivering business value is huge.
One of the benefits of cloud-based solutions is that they can extract and manage huge volumes and variety of an organisation’s data from multiple enterprise systems. They can then validate the data, perform tax determinations which can then be used to facilitate routine tax compliance and reporting processes or provide reusable and scalable value analytics through real-time dashboarding and management reporting. The EY Global Tax Platform is a cloud-based data management platform is one such solution, which can be used in a plug-and-play fashion and is easily updated as tax laws change and technology advances.
Building a modern tax and finance function
The impact of embracing technology across your tax and finance function can be transformative. CFOs now have more choices than ever. Every organisation needs to decide on its mix of work done internally and that done with service providers, and how technology will support. Many companies will decide a hybrid approach is right for them, where they decide to continue to own some tax and finance tasks they consider to be critical, while co-sourcing or out-sourcing others. This approach drives overall effectiveness and efficiency, while empowering internal teams to focus on high-value strategic matters.
Creating this kind of vision is a challenge, but also an opportunity to reimagine the tax and finance function of the future so they contribute to the company’s delivery of sustainable, long-term value across all its stakeholders. Early engagement with your EY team to explore the ‘art of the possible’ is this context is highly recommended.