Advanced technology skills are the single biggest skills gap within existing corporate tax teams as tax departments struggle to find high-quality tax people with tech savvy.
More than one-half of corporate tax departments surveyed in the recent Thomson Reuters Institute’s 2021 State of the Corporate Tax Department report classified themselves in the two least-sophisticated categories — chaotic and reactive in regard to their operations.
The two categories were defined as:
- Chaotic — Chaotic tax departments use email, spreadsheets, system reports, and manual processes to collect, review, and prepare compliance and respond to audits; individual tax departments work independently.
- Reactive — Reactive departments utilise tax department databases, some third party software, some automated feeds, but are usually not connected to enterprise data or departments across the company.
In fact, just less than 20% of tax departments consider themselves to be in the top categories, optimised or predictive. At the same time, advanced technology skills are the single biggest skills gap within existing tax teams, and tax departments are struggling to find good tax people, as well as those with strong technology skills.
One of the common arguments made by corporate tax departments against investing in technology is their tight budgets. Indeed, one of the downsides of being more sophisticated is the higher operational costs involved. Effective technology and streamlining processes take significant investment, as do hiring professionals with advanced technology skills. More than one-half of the departments surveyed have at least one analyst or tech support role in their tax department. Departments which did include one or more of these support roles are typically spending twice as much as those without. Moreover, under-resourced departments spend approximately 14% less, on average, than sufficiently resourced companies.
As the report made clear, however, the potential risks from a compliance, work quality, and talent retention perspective should be a warning for tax departments to address this shortage. When you factor in the aforementioned costs and the potential price-tag of replacing talent with tax expertise in recruiting, hiring, and onboarding in a tight labor market — typically two- to three-times the salary of the position — the costs are likely to even out. Nearly one-half of corporate tax departments reported being strained from a resourcing perspective, and the situation is worst in the U.S., where 56% of departments feel under-resourced, up four percentage points compared to last year’s (pre-pandemic) corporate tax report.
The need to retain existing talent is vital because of market constraints, including:
- for new hires, the general quality of candidates on the market is insufficient, according to nearly one-fifth of tax departments; and
- further, 14% of departments say they can’t find candidates with sufficient tax experience and 7% can’t find candidates with advanced technology skills.
In addition, departments that employ multi-faceted strategies — including investing in technology, automation, and upskilling — to better address resourcing shortages can then enable existing team members to focus on higher value tasks. This multi-faceted approach was the most common strategy cited by survey respondents.
Solutions to address the technology skills gap
Tight budgets, existing skill gaps, and perceptions of the shortage of qualified candidates present a massive opportunity for upskilling existing corporate tax professionals in technology. Luckily, market leaders in tax education are responding with many options for corporate tax departments leaders to offer to their staff. In fact, many universities are building out courses and making innovations within their curriculum to tackle this technology skills gap.
The University of Illinois, for example, is establishing its own data analytics center with support from Deloitte to address the gap in data analytics. The main goal of the center is to create analytics content, cases, and webinars that are broadly available for tax professionals to access. Further, the university created a new Business Analytics iCademy in which any tax professional can enroll.
And for those professionals who prefer to take a course or two, online course that feature accounting related data analytics programs and technology integration are plentiful.
During the pandemic, adoption of technology and video meeting platforms increased exponentially; and it was no different for corporate tax departments. In fact, many cited improved collaboration due to these innovations, according to the survey.
For those corporate tax departments that had experienced this improved collaboration, there is a clear reason why, according to the survey — improved communication led to improved collaboration. Whatever the format, more regular, personal, and efficient communication leads to better collaboration. Thus, the more connectivity and investment in skills of existing talent that tax departments undertake, the greater the engagement among employees and the higher the level of employee happiness, which in turn, means higher retention of top talent.
Natalie’s article was originally published by the Thomson Reuters Institute, the Thomson Reuters thought leadership forum.