Many executives who lead large companies’ tax departments are challenged to keep pace with ever-changing regulatory requirements, in-house demands, and technological challenges, according to a new survey.
In the 2020 Corporate Tax Departments Survey, released earlier this month by Acritas, a Thomson Reuters company, and the Thomson Reuters Institute, chronicled how leaders of corporate tax departments are viewing these challenges. The report is based on interviews with tax department leaders from 23 large, U.S.-based companies and a survey of more than 300 corporate tax professionals.
5 components for success
The findings include five components that corporate tax leaders need to be successful.
The report reveals a Catch-22. Corporate tax departments implement technology to be more efficient and manage increasing workloads and regulatory complexity, but they lack the time and skills needed to fully realize the technology’s potential.
The survey found that departments that spend more on tax technology ultimately spend less overall — strong evidence that technology creates greater efficiencies once it’s up and running. However, nearly 60% of survey participants described their use of technology as reactive or chaotic.
“Much of the problem lay in resourcing, our survey found — and with recruitment freezes becoming the norm, it seems likely that existing resource challenges may become compounded,” the report noted. “Many of the respondents say they feel under-resourced and struggle to keep up with day-to-day pressures.”
So, how can tax departments implement the technology needed to manage their workload when their workload prevents them from implementing technology?
The answer is to acknowledge the problem, and persuade stakeholders who control the budget that additional resources are required in the short-term to secure operational efficiencies for the long-term. This might include extra help with day-to-day compliance work to give the tax team more time to implement new software, complete training, and establish new streamlined processes.
That leads to the second thing corporate tax leaders need — the right set of skills on their teams.
Indeed, nearly 40% of survey respondents said their corporate tax departments lack specific tax-related skills, and 30% lack essential technological skills — strongly suggesting the need for a professional development strategy.
“At the heart of the ‘people issue’ is whether a department has the right people,” the report observes. “Sometimes, it’s simply a question of leadership — getting people to change their attitudes and be willing to adapt — but other times it’s a question of skills. You either need to train existing staff or bring in staff with a new skillset. And that leads to the question of whether to create a role for a tax technologist.”
You can access the full 2020 Corporate Tax Departments Survey here.
The survey found that companies increasingly are adopting such a role — a professional who combines tax knowledge with technology and data analysis skills. In most cases, these companies help their tax professionals acquire technology and analytical skills, rather than teaching tax and accounting to tech professionals.
The report also highlighted the importance of keeping tax teams motivated and enthusiastic. “These teams need to feel a sense of ownership of any new processes or technologies. This requires a combination of clear communications, practical training, and supportive leadership.”
3. A seat at the leadership table
Companies routinely make moves — mergers and acquisitions, expansions into new markets, changes to tech systems — that increase workload for the tax team. “Business operations seem to be historically the biggest challenge,” said one corporate tax professional interviewed for the survey. “And, unfortunately, you don’t know what that’s going to be, whether it’s an acquisition or a system change… . You don’t know.”
Tax executives who are on their companies’ leadership teams are better informed and equipped to plan for and manage these changes. In fact, a higher profile also helps the tax department when it’s time to discuss and implement new tax technology. The survey found that nearly one-third of corporate tax teams have little or no involvement in making the business case for tax technology investments. For these organizations, the first step is for tax department leader to be active in those deliberations.
“Tax departments benefit and are more effective when they have a higher profile in the company,” the report concludes. “This allows them to stay informed about corporate actions… that will impact their workload, showcase successes and challenges, demonstrate the need for resources, and provide strategic commercial advice.”
4. IT support
The report notes that several respondents had said “relations with the company’s IT department were often a problem: IT teams had their own mandates and were less inclined to understand or support the more specialized requirements of the tax team.”
It’s essential for the tax department leader to have a collegial relationship with the IT department, because IT often controls decisions and budgets for tax technology.
“Often (the tax department) does not own the technology budget, because the investment is quite large,” said another survey respondent. “In the company I was in, IT owned the budget, so I was making my business case to IT with the support of finance leadership and tax leadership, getting approval for the project, getting a budget I was going to need to work within, interviewing and bringing in vendors, and then submitting a request for proposals or quotes to the vendors. I spent probably half-a-year interviewing different vendors with my requirements, bringing in my tax staff [and] having them see demos of my vendors, then narrowing it down to two vendors.”
5. Change management
Assessing the tax department’s strengths and weaknesses is critical, but it is just one part of the managing change within the department. Other vital components include crafting a compelling strategy; delivering results despite limited resources; staking out a higher profile within the enterprise; building skills and relationships; creating a tech roadmap, making the business case for it, executing the plan, and then measuring and reporting the return on investment.
Opportunity in getting it right
Tax department executives need the full complement of leadership skills — starting with exemplary change management abilities — to juggle all these components successfully.
“It will take… hard skills to set strategy, allocate budgets, and select the right technology; and soft skills to communicate the strategy, inspire their teams, and manage change,” the report observes. “For those tax team leaders that get it right, there’s great opportunity to add value and increase job satisfaction.”