The vast majority of tax and finance leaders see a need for improved technology and data skills in their employees, according to a new international survey.
The survey, by Ernst & Young, polled 1,650 tax and finance leaders in over 40 countries. It found that 84% of the respondents plan to adapt their tax and finance functions over the next two years, thanks to challenges related to talent, regulation and technology. Most of the respondents (95%) see a need for improved data and technology skills among their people.
Among the issues are electronic tax filing, with 59% of the respondents saying compliance with new digital tax filing obligations will increase expenditures. Approximately 83% of the respondents expect to spend at least $5 million and an average of $11.1 million over the next five years to help ensure they adhere to the new rules. Nearly one-third of the respondents (32%) cited uncertainty around regulatory and legislative change as the biggest barrier to success. Despite all these demands, 87% of companies plan to reduce the costs of their tax and finance functions in the next two years.
A big proportion (81%) of respondents said they are “more likely than not” to co-source certain tax and finance activities within the next 24 months, with the proportion rising to 96% for organizations with revenue of $30 billion or more.
“The tax function is making steady progress as a strategic engine to business,” said Kate Barton, EY global vice chair of tax, in a statement. “Organizations that have started transforming their tax and finance functions are seeing the value that is yielding dividends in this unprecedented market and legislative environment. They are clear on the benefits of modernizing their tax function to drive value, manage risks and take out costs, while facing mounting talent and technology pressures.”
The COVID-19 pandemic has provided some of the catalyst for change, with 70% of those surveyed saying that the experiences of the past two years have sharpened their focus on the need to transform their functions. Nearly all the leaders surveyed (95%) said they are reallocating their budget so they can focus on strategic priorities.
The “work from anywhere” environment that has sprung up in response to the COVID-19 pandemic has added to the tax complexity. Fifty-five percent of the survey respondents believe they will face additional tax and reporting obligations in the coming years because of a more geographically dispersed workforce, adding unanticipated complexity to their tax compliance obligations. The pandemic also made many businesses realize they lacked up-to-date data and technology tools when their employees were separated from their files during COVID-19 lockdowns.
“The COVID-19 pandemic has accelerated the drive to transform,” said Dave Helmer, EY global tax and finance operate leader, in a statement. “Businesses are under enormous pressure to bring added value to their organizations while meeting their essential tax compliance obligations. Many are confronting these challenges and — whether it’s through working with third-party providers or managing more in-house — they are looking at ways to make their tax functions fit for the future.”
Another major issue confronting companies is finding skilled tax professionals. Ninety-five percent of the business leaders surveyed see a skills gap in the tax function and believe there is a need for tax and finance professionals to update their skills when it comes to data, processes and technology over the next two years if they are to keep up with the rapid rate of change.
Half (50%) of the largest businesses said their lack of a sustainable plan for data and technology is the biggest barrier to delivering their tax function’s purpose and vision. The survey found 70% of the respondents intend to spend $2 million or more on tax technology over the next three years.
The tax function has also come under greater pressure to help their organizations address environmental, social and governance objectives. Nearly half (46%) of respondents said environmental and climate risks are the most important ESG issues facing their organization in the next two years; and nearly all the respondents (94%) said they are co-sourcing ESG reporting activities or considering doing so.
