Looking at end-to-end processes
EY's annual survey with Tax & Finance functions within international companies worldwide found that 96% of those companies are looking to transform their tax and finance operating model in the near future. Within that operational transformation, co-sourcing in particular, will play a significant role where certain activities will be taken in-house by the tax and finance teams while other activities, such as financial statement preparation, preparation of tax returns or tax audit assistance, will be outsourced. Tax departments look at their end-to-end process and identify certain - often routine - activities they want to outsource. By doing so, they can save time and free up resources, allowing the tax & finance function to focus more on activities that comprise strategic value for the company. Moreover, co-sourcing is often a way to reduce costs within the department, which, as mentioned, is demanded by stakeholders. Technology, automation and standardization also play a crucial role in co-sourcing.
Tax and sustainability
The rising need for transparency introduces numerous new guidelines and initiatives, such as ESG, commonly associated with environmental sustainability and circularity. With the Global Reporting Initiative (GRI) providing sustainable reporting standards, for example on tax in recognizing the vital role tax contributions have on sustainable development. ESG is getting an increasingly important role, also when it comes to tax. Within co-sourcing, there is a rising demand for ESG reporting in the direction of tax contributions. This shift will only further increase in the coming years. Tax and sustainability are not often mentioned in the same breath, but they are effectively interconnected.
Tax Control Framework
The increasing demand for transparency is also reflected in the establishment of a Tax Control Framework, which is gaining importance among stakeholders such as Management and tax administrations. We see that not only in Belgium, but also in other countries, tax administrations want to gain more insight into the internal processes of a tax department. The Tax Control Framework should ensure that a company's tax risks are known and also controlled through appropriate implementation of measures. It helps companies to implement their tax strategy in a manageable and controllable way. In Belgium, the importance of a Tax Control Framework has increased with the introduction of the Co-operative Tax Compliance Program by the Belgian government in 2019: if you want to be able to participate in it as a company, you must have - among a number of other criteria - a solid Tax Control Framework in place.