7 minute read 1 Dec 2021
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Five tax steps to take before 2021 ends and global reforms take hold

By Brian Foley

EY Global Tax Accounting and Risk Advisory Services Leader

Passionate about creating value in and through tax accounting. Drummer who is always looking for a gig. Husband and father.

7 minute read 1 Dec 2021
Related topics Tax

Tax teams must contend with an evolving global tax picture and a mix of external and internal factors as the year draws to a close.

In brief
  • 2021 has seen accelerated changes to global tax policy that will have a direct impact on how tax accounting teams report at year-end and far beyond.
  • Broader operational change – to supply chains as well as internal ways of working – are bringing unprecedented pressures to tax teams.
  • Those teams must take the steps required to not only close the year out, but also build in resilience for tax challenges set to arrive in the years ahead.

As 2021 comes to an end, tax accounting and reporting again will present several challenges to companies, many of which are simultaneously working to address business and personnel disruptions, supply chain constraints and inflation.

The tax landscape continues to evolve rapidly. The conversation may be dominated by the Organisation for Economic Co-operation and Development’s (OECD) base erosion and profit shifting (BEPS) and BEPS 2.0 initiatives — including taxation of the digital economy and the global minimum corporate tax rate — but those projects are only part of the story. Tax accounting teams are facing change on multiple tax and regulatory fronts — driven by everything from COVID-19 recovery to finance transformation, and from new tax laws in multiple jurisdictions to expanded sustainability disclosures.

All of these shifts and changes directly impact the tax provision and/or non-financial tax-related disclosures and reporting.

The good news is there are things the teams can do to address this complex and shifting picture. Here are five key areas of consideration for tax accounting teams as they approach year-end — and what they can do in response.

1. Tax laws and regulations

The corporate world has been managing changing tax laws and regulations for many years, and 2021 has been another active year for new tax laws and  regulations. The UK corporate tax rate change is one of the many examples of new laws impacting taxpayers globally, and, as of this writing, several tax proposals are pending globally. The increased volume of new laws and regulations, as well as the number of proposals progressing through local legislative processes demands more attention of companies’ tax departments to assess and timely account for changes and model the impacts of new proposals.

The tax accounting response

Tax teams should proactively monitor and anticipate tax law and regulatory changes, to assess, measure and account timely for changes. 

But monitoring changes alone isn’t enough. Tax teams should model significant tax proposal scenarios  to understand the potential impact of proposed changes, including changes to existing tax positions, creation of new tax positions and impacts on realization of deferred taxes and assertions related to reinvestment of subsidiaries’ earnings.

Companies should consider whether tax-related financial statement disclosures should include discussions of tax law changes or significant proposals, and whether their processes and controls over financial reporting sufficiently address data sourcing, analysis and calculations related to tax law changes.

In order to keep up with the fast-moving tax policy picture, read the EY Quarterly Tax Developments (pdf)

2. Tax controversy

Work-from-home and hybrid working models impacted companies as well as tax officials. Remote work slowed the pace of some new and ongoing tax examinations. At the same time , tax officials accelerated use of “digital tax” processes and electronic filing to focus examinations on specific issues rather than broad reviews. Tax officials  are also leveraging expanded disclosures and reporting, including country-by-country reporting data to inform analytics and risk assessments.

While many companies may have “open” tax years that pre-date digital tax, electronic filing and expanded disclosures and reporting, these advances are equipping tax officials with increasingly more data to inform their examination processes and inquiries of more recent tax years.

The tax accounting response

Companies should assume the potential for tax controversy when documenting tax positions and tax treatments for tax accounting purposes. Companies should identify opportunities to align tax provision and tax compliance processes to manage differences between provision and return calculations and leverage analysis and documentation of significant tax positions and tax treatments across the reporting life cycle. This holistic approach, combined with global transparency can improve early identification of potential controversies and facilitate timely involvement of senior tax team members.

Ultimately, tax controversy aligns with tax governance and sustainability. Notably, common sustainability tax disclosures encourage companies to disclose their: approach to tax, tax controls and risk management, and tax stakeholder engagement and management of tax concerns.

3. Tax operations

On top of all of the external challenges and change, many companies are also experiencing significant change to their financial and accounting systems.

Financial reporting pre-tax income is the most common starting point for tax provision calculations but accessibility to legal entity group and statutory financial reporting remains a challenge for many organizations. Tax accounting teams must regularly reformat, reconcile and otherwise transform financial data into a condition that is suitable for tax reporting. These data transformation processes often consume valuable time during already busy financial close cycles, delaying the start of tax provision calculations. These data transformation processes often limit companies’ abilities to accelerate financial reporting close cycles to meet stakeholder demands for more timely information and reporting.

Data and tax accounting close process challenges are amplified by personnel turnover and open tax accounting talent positions.  Together, these factors can result to increase in potential risks in tax reporting.

The tax accounting response

Tax accounting teams should collaborate with accounting, finance, IT and HR teams to ensure data and resources are available to gather and transform relevant data, and complete tax calculations with sufficient time to perform appropriate review and oversight of the reporting process. Linking and standardizing data flows and work flows across tax forecasting, tax provision and tax compliance processes can potentially reduce inefficiencies and risks.

Companies should also be asking whether their existing control environment for tax accounting and reporting is still up to par in the face of changes in personnel, responsibilities and skills, and whether remote working arrangements are suitably robust for the scope of year-end reporting.

Leveraging shared service centers or business process outsourcing may be effective ways to execute routine tasks, and companies may wish to consider adopting a risk-based approach to allocating resources, including the use of external advisers, to ensure the organization is addressing the highest risk issues.

If the company is updating/changing, or planning to update/change, financial reporting systems, the tax team should be involved early in the blueprinting and scoping effort to identify data and workflow needs, and to anticipate downstream effects of changes. When tax is not involved in blueprinting and scoping systems changes, tax teams are often left to continue extensive data transformation after expensive systems changes are implemented.

4. Transactions

Strategic investments have risen in number thanks to available capital, favorable interest rates, and receptive capital markets. Significant liquidity exists globally which has stoked investor appetite for acquisitions.

Meanwhile, many organizations have been rethinking their business models and operating structures to respond to disruptions, or refocusing on core business to drive sustainable growth, resulting in restructurings and divestitures.

Tax departments, already facing significant challenges, are being called upon to devote resources to assist in planning, executing and integrating these transactions. Tax teams can expect to encounter complex and nuanced arrangements that require in-depth analysis.  The unique nature of strategic transactions presents additional risks to tax accounting and reporting. Companies should ensure systems and controls are in place to manage these risks and avoid delaying a transaction or diminishing a desired outcome.

The tax accounting response

Tax accounting teams have to anticipate and prepare for the effects from transactions, as acquisitions, dispositions and restructuring will bring extra complications — and added risks.

Teams should also consider the potential impact on tax processes and controls and plan for additional resource needs ahead of transactions to complete additional tax accounting and reporting requirements.

5. Environmental, social, and governance

ESG is an evolving area of reporting for many companies, covering a growing range of environmental issues, including carbon emissions, water use and plastics pollution, as well as diversity and inclusion, employee rights and a number of other social issues.

Tax routinely forms an important component of a company’s overall ESG story. First, a range of new environmental taxes and incentives have been introduced to drive ambitious carbon and other emissions targets, natural resource conservation, and reductions in plastic and other wastes. Second, because a company’s total tax paid and country by country tax reporting provide greater transparency to its level of social contribution and economic commitment to the communities it serves.

Currently, the ESG reporting landscape is a mix of voluntary and mandatory global standards and local requirements. These frameworks, including for example, World Economic Forum’s ESG framework and Global Reporting Initiative’s ESG standards include qualitative and quantitative tax-related disclosure requirements. 

Companies may be expected to disclose their: tax strategy, tax governance and risk management approach, tax country-by-country reporting, total tax paid or total tax contribution, approach to transfer pricing and other factors that extend beyond traditional financial reporting disclosures.

While currently the ESG reporting frameworks provide their own specific requirements, the International Sustainability Standards Board announced at the COP26 climate conference in November 2021, by the International Financial Reporting Standards Foundation, was organized to establish global standards for sustainability. Also, although global standards do not exist currently, companies increasingly are seeking third-party attestation over their ESG disclosures.

All told, expanded ESG disclosures may strain further tax accounting resources and require new processes and controls to enable consistently reliable reporting.

The tax accounting response

Companies should ensure the tax team is involved with ESG reporting because of the importance and relevance of tax to the entire sustainability equation.

Tax teams should understand how ESG reporting is affected by tax policy, law and regulatory developments, such as the EU’s Carbon Boarder Adjustment Mechanism and EU’s public country-by-country tax reporting requirement.

For many tax teams, the process begins with self-examination. It’s important to understand what ESG means for the company, why and how ESG impacts the tax function, and how ESG reporting differs from financial reporting. Tax teams need knowledge of company disclosure principles, such as reporting objectives, the scope of disclosures, the reporting standards that are used, and where there are gaps and overlaps between financial and ESG reporting processes and controls. Tax teams also may value benchmarking their ESG reporting against peers.

Quality, timely information and underlying process controls are critical to facilitate a company’s ESG message is both reliably and effectively compiled, and clearly communicated to stakeholders.


As the year draws to a close, CFOs and heads of tax will be working closely to understand, evaluate, account for and disclose the various business and tax matters the organization has encountered during the year.

Tax accounting professionals can expect challenges ahead of year-end and should plan to address these challenge proactively while continuing to adapt to remote working models, staff changes, and staff openings.

By thinking strategically, anticipating major changes and modeling their potential impact, and working holistically and transparently across the organization, tax teams can dampen the impact of year-end challenges to deliver a successful year-end close.

  • Ten steps to take now to accelerate tax accounting work ahead of the year-end close cycle

    Many elements of the year-end tax provision can be concluded well ahead of the close cycle. Companies should consider taking steps to pull work out of the year-end close cycle, to manage stress and risk.

    Here are 10 tangible steps that can be taken now:

    1. Develop a year-end close calendar and align expectations, communication protocols, and timing with your external auditor
    2. Address changes in personnel and roles and responsibilities to avoid gaps in processes and controls
    3. Conduct technical analysis and tax accounting for any significant transactions or other changes in business operations
    4. Complete a technical analysis of tax law and regulatory developments, and consider their impact on the organization. Do the same for newly adopted accounting standards and interpretive guidance
    5. Complete provision-to-return calculations, and evaluate differences for changes in estimates versus errors
    6. Document changes in uncertain tax positions and tax treatments
    7. Complete analysis and documentation of transfer pricing
    8. Evaluate non-income-tax risks (such as VAT and customs)
    9. Complete a walk-through and test of internal controls
    10. Discuss the scope and requirements of tax-related ESG reporting with your sustainability team


As 2021 draws to a close, the tax landscape is arguably more complex than ever before — with ongoing global tax reform and unexpected pressures, largely as a result of the COVID-19 pandemic, creating a picture that tax accounting teams could not have predicted.

Decisive action will ensure not only that the typical year-end processes are taken care of, but also that the value of the tax function to the entire organization is clearly demonstrated.

About this article

By Brian Foley

EY Global Tax Accounting and Risk Advisory Services Leader

Passionate about creating value in and through tax accounting. Drummer who is always looking for a gig. Husband and father.

Related topics Tax