Despite some progress, much work remains for many companies to create an intelligent tax function.
Toward an intelligent tax function
In this era of more sophisticated tax authorities and the accompanying corporate responsibility to pay the right amount of tax, organizations require a new kind of tax function – an intelligent tax function – that is connected to the business and thinks about data differently. This intelligent tax function must have both the right talent and technology to harness data to create value.
Our 2020 Global Tax Technology and Transformation Survey examines the spotty efforts firms are taking overall toward building an intelligent tax function. For instance, we found that 46% of tax functions are not overseeing real-time submission of transactional data.
Historically, tax functions have paid close attention to tax return filings, but it seems that they have not adapted to the new world of real-time or near-real-time submissions of more detailed data.
About half of survey respondents report that they spend 40-70% of their time on data extraction, manipulation and cleansing before it is ready for tax processing. Moreover, one-third of manual adjustments are related to allocations.
ERP gap
90%of companies surveyed do not have a true single-instance ERP.
One of the contributing factors is only 10% of organizations have a true single-instance enterprise resource planning (ERP) system. Tax functions need to focus on getting data processed correctly at the source, which means setting up ERP and other source systems correctly for tax requirements.
Good quality data at the source will deliver tangible downstream benefits by reducing risks, saving time associated with manual adjustments and enabling more frequent reporting. Moreover, with better quality tax data, organizations will be able to better leverage internal shared services centers and/or outsource to external providers to enable tax functions that can focus on value-added work.
Mixed progress
73%of surveyed companies plan to increase tax headcount with people with data and tech management skills
Tax authorities are rapidly acquiring technology and data skill sets, giving them a potential advantage unless tax functions do the same. Given that environment, more than 73% of tax functions surveyed intend to hire more data and technology professionals; correspondingly, only 25% or less anticipate hiring more accountants and lawyers.
If tax functions do not hire technology or data specialists, tax authorities will have the advantage as they are quickly acquiring these skills.
It’s a mixed result and shows that, despite some progress, much work remains for many companies to create an intelligent tax function.
Summary
While some tax functions are adapting to an increasingly data-centric, automated tax environment, others are not. Hiring additional data and technology professionals and building a true single-instance ERP are key investments to consider.
