- 84% of Asean companies (global 85%) anticipate an increased workload from emerging digital tax filing requirements
- 70% of Asean companies (global 73%) are more-likely-than-not to co-source tax and finance activities in the next 24 months
- 55% of Asean companies (global 45%) have trouble providing new responsibilities and career advancement
More than half of (Asean 59%, global 65%) companies say they lack a sustainable data and technology plan to implement their tax and finance function’s purpose and vision. Companies also face a challenging environment characterized by unprecedented legislative and regulatory change, significant talent challenges and the need to do more with less, only magnified by the impact of COVID-19 pandemic. This is according to a new EY Tax and Finance Operate report that surveyed 1,013 organizations globally, including close to 100 across Asean (Indonesia, Malaysia, Philippines, Singapore, Sri Lanka and Thailand).
In response to these challenges, nearly all organizations (Asean 96%, global 99%) said they are acting to transform their tax and finance operating models, and 70% of Asean organizations (global 73%) said they are more-likely-than-not to co-source critical activities in the next 24 months to relieve these growing pressures.
Kate Barton, EY Global Vice Chair – Tax, says:
“Businesses are wrestling with a choice between building out their own capabilities – utilizing the right people and technology to keep up with change – or working with a third-party provider that is 100% focused on the task and has the scale to succeed. The demands on today’s tax professionals have also increased. They not only need to have world-class tax technical knowledge, but a deep understanding of data and science, with proficiency in tools such as artificial intelligence, automation, machine learning, data governance and analytics.”
Unprecedented pace of change and cost pressures
The pace of legislative and regulatory change is overwhelming tax and finance functions, with 84% of Asean survey respondents (global 85%) anticipating an increase in their workload to comply with emerging digital tax filing requirements.
In response to US and other major tax reform, 44% of Asean large companies (global 83%) – those with revenues of US$20b or more – say they received additional budget to implement the changes. Fifty-five percent (55%) of Asean companies (global 44%) estimate a spend of at least US$10m over the next five years to comply.
All the while, tax and finance functions are having to do more with less, with over seven in ten (Asean 71%, global 79%) of respondents planning to reduce the costs of their tax and finance function over the next two years.
Chia Seng Chye, EY Asean Tax and Finance Operate Leader, says:
“The heavy demands on the tax function and tax professionals are unprecedented in the last three years and these will increase exponentially going forward. Particularly in situations such as the current COVID-19 pandemic, corporations are compelled to adopt telecommuting. Companies can face challenges in seemingly simple tasks like accessing records and documents, which are in physical copies kept in offices instead of electronic copies stored on servers or the cloud.
“These are real-life situations that should bring forward discussions on the ‘tax function of tomorrow’ with senior management and the board of directors. It will not be business as usual post COVID-19 crisis,” he adds.
Data and technology transformation deficits
Adding to the growing regulatory demands on tax and finance functions are a deficit in technological capabilities, with only 3% (Asean and global) of tax functions surveyed making extensive use of disruptive technologies such as AI and machine learning. Thirteen percent (13%) of Asean organizations (global 15%) are not using them at all. Those that aren’t investing in data and technology as part of a transformation strategy are potentially limiting effective delivery of their tax function’s purpose and vision in the long-term.
Changing talent needs
Another challenge lies in both recruitment and retention of talent, with 53% of Asean organizations (global 45%) struggling to provide new responsibilities and career advancement opportunities for their tax and finance personnel. In addition, 60% of Asean tax and finance functions (global 62%) spend the majority of their time on routine compliance activities – as opposed to higher valued-added activities.
Also, a clear majority of respondents (Asean 76%, global 83%) believe the core technical competencies of their tax and finance personnel must be augmented to include more data, process and technology skills over the next three years.
“Through conversations with CFOs and tax directors, we see that they expect their tax functions to focus on high-value strategic activities such as tax planning and managing controversies, and much less on routine compliance matters. The options are to outsource these routine, repetitive and sometimes heavily manual compliance tasks; invest in technology such as robotics process automation or data analytics; or a hybrid of both. Given the cost of IT investments and the war for talent, working with a third-party provider that can provide economies of scale from IT investments and dedicated tax professionals can help them balance their priorities.”
EY Tax and Finance Operate is a technology-driven delivery model that pairs highly skilled resources with leading class processes to help companies achieve their strategic vision. Building proprietary capabilities can be challenging and costly, and many organizations find it cheaper and more effective to co-source select activities, leveraging the significant investment that EY team have made in people, process and technology.
To learn more about the EY Tax and Finance Operate survey, visit ey.com.
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