How changing the rules of the game can help tax executives tackle their expanding agendas

Facing the headwinds

The challenges facing Tax are unlike any seen in decades, with no end in sight. And it’s not simply the volume of reporting, compliance, and audit burdens rising around the world. Roughly 61% of tax leaders, according to PwC’s 2022 Pulse Survey, cite increased complexity or uncertainty as their top challenge. Not surprising given the potential for US tax legislation and the global push for significant tax policy and administration shifts under the OECD BEPs initiative.

Obstacles facing Tax also include difficulty retaining and attracting personnel to cover all of the tax function’s needs, both tax technical and digital. Tax executives recognize the scarcity of locating specific expertise and the growing skills gap within their existing teams. Many tax teams are feeling overwhelmed with reporting and other compliance burdens, such as increased audits around the world, while also having to address budget challenges. 

At the same time, the ability to bring quick and data-driven insights to the C-suite is now an imperative for Tax, as C-suites are tackling everything from supply chain disruption to driving digital transformation. The growing trend is for Tax to be at the table during decision-making to avoid unexpected costs and potentially enhance ROI in a significant way. Unfortunately the tax function may not have current capacity to deliver in a way that it desires.

Exhausting multiple levers

So how are tax executives responding to this ‘spike’ in obligations and hurdles? Tax continues to embrace technology as a means of gaining resource efficiencies. According to PwC’s Pulse Survey, nearly two-thirds of tax leaders intend to invest in technology to support the reporting function this year. About 59% of tax leaders report that in response to the evolving global tax environment, their company is considering automating more processes.

Companies are overhauling their company-wide ERP systems and leading tax functions are aiming to get in on the ground floor to capture efficiencies. More and more tax executives are keenly focused on obtaining certain tax-ready data automatically, as part of broader ERP initiatives, to help eliminate manual data extraction and processing, as well as reduce risk.  

In addition, training tax team members to better leverage technology is a critical strategy used by many tax functions. According to PwC’s Pulse Survey, over half of tax leaders say they’ll invest in technical upskilling.

But are these levers enough to reach a brisk operating tempo and overcome the current operational strain? Even if the answer is ‘yes’, is that tempo sustainable over the long haul? Is the tax function properly equipped to meet C-suite expectations relating to planning initiatives without taking away from its core compliance tasks? Can it pivot quickly? Leading tax executives are asking these questions, and some are surprised at the answers. 

More tax functions may be reaching a ‘tipping point’ where they may not have a proper ecosystem to run smoothly. One extraordinary project or event may be manageable, but the myriad of simultaneous issues that are requiring attention has changed what resources are required. Even traditional approaches to managing workload such as reallocating staff or obtaining loaned staff may not be viable on a longer-term basis.

Changing the rules of the game

Many tax executives are leaving a ‘reactive’ approach to challenges at the door. Instead they want to implement next-level solutions that not only solve immediate problems, but also allows them to be better prepared for whatever arises down the road. A clear trend is leveraging managed services. According to PwC’s Pulse Survey, at least 41% of tax leaders plan to have increased use of managed services, as well as outsourcing or third parties. And 89% of companies with $30B or more in revenue plan to outsource or co-source their reporting.

We’re hearing from tax executives that managed services enable them to better steer the strategic vision of their tax function. Having more control of resource allocation is a key element. Using managed services to address operational basics − such as specific tax return filings, distinct tax return calculations such as depreciation, and planning projects − can free up time for strategic priorities, such as executing C-suite-level requests to support decision-making.

But managed services can bring even broader organizational benefits. Managed services is an operating model that takes the technical expertise and investments of a professional services firm and creates a support framework for the tax function. What can that bring? Immediate access to robust technology tools that allows Tax to have next-generation capabilities that help them work seamlessly with the rest of the business. This is in addition to more refined analytics and scenario-planning that can occur in a quick time frame.

The human capital benefits cannot be understated, according to many tax executives. Managed services can increase the agility of the department by providing immediate access to resources that understand the complexity of the regulatory environment and who can provide enhanced tax insights. And as business needs grow and change, tax functionality can be scaled up or down in a steadfast manner − a critical task given the current business landscape.

Finding the right balance

There is not a one-size-fits-all answer when it comes to the perfect balance of resources, but if you’re feeling like your tax function is losing effectiveness at the same time that the C-suite and business leaders are wanting you to up your game, you are not alone. The good news is that you can learn from many other companies to find a tailored strategy that works.