Corporate tax departments are going through major transformation in response to the challenging legal and regulatory environment, according to a new survey.
Deloitte released its
When asked about the challenges that tax departments are expected to face over the next three to five years, complying with evolving tax laws and regulations around the world was cited most frequently by 43% of the respondents.
The tax professionals surveyed are concerned about the Organization for Economic Cooperation and Development's plan for combating base erosion and profit shifting, also known as OECD BEPS, and its Pillar One and Pillar Two components for taxing income generated by companies in other countries and for a global minimum tax rate of 15%.
"To comply, tax departments will need accurate, timely tax-related data that is integrated across their organization, whether to calculate their global tax liability, comply with Pillar Two, or assess the indirect taxes owed in individual jurisdictions around the world," said the report.
Achieving greater efficiency remains an important objective as well. When asked about the priorities for their tax department over the next three to five years, 31% of respondents cited "increase the efficiency or reduce the operating costs of the tax department."
Technology is also an important priority for the tax executives surveyed. Respondents cited access to the latest technology capabilities (54%) more frequently than reduced operating costs (51%) as a major or significant benefit of outsourcing an entire activity or function in the tax department. Reduced need for capital investment in technology (45%) was also cited as a big benefit.
Tax departments are relying on professionals with technology skills to comply with the increasing requirements. When asked where their tax department will have the greatest need for skills over the next three to five years, survey respondents most frequently cited data analytics, data-driven strategic insights and data management at 44%.
"Dramatic changes are putting tremendous pressure on tax departments," said Andy Gwyther, a partner at Deloitte Tax & Legal, in a statement. "Despite these challenges, tax and business leaders are increasingly making use of a wide range of resources to achieve their objectives — from relying on IT and finance to help integrate tax into the ERP systems, to gaining technology and subject matter expertise via outsourcing to third parties. Our research echoes what we're hearing from our clients aiming to move their transformation efforts forward and how priorities have changed after the pandemic, and what skills they require for the future."
Many tax departments are also looking for help in other parts of the company or outside the company. When asked about their company's most important strategies to achieve a lower-cost operating model, survey respondents most often cited implementing/increasing use of shared service centers (53%), migrating activity out of the tax department to other teams within the business (48%), and third-party outsourcing (40%).
Companies have been increasing the practice of performing key tax activities outside the tax department since 2016, and that trend grew from 2019 to 2021 due to the impact of COVID-19 and the HR and technology challenges from the move toward remote work. The 2023 survey saw that trend moderate a bit, with respondents saying less often that they performed global tax provision, corporate income tax returns and payments, and indirect tax returns and payments outside the tax team, compared to 2021. But for each of five tax activities — global tax provisioning, transfer pricing documentation, corporate income tax returns and payments, indirect tax returns and payments, and statutory accounts — the percentage of companies that reported it was performed outside the tax team was higher in the current survey than in 2019, and there has been a continuing increase in their intention to outsource statutory accounts and transfer pricing documentation since 2021.
