Tax Function of the Future series

Predictions and insights

Evolving trends are changing the way tax functions are operating – both day-to-day and with long-term strategic planning. The Tax Function of the Future will look surprisingly different from today's...are you prepared?

In our second piece, “Global tax transparency and risk management - The new landscape prompts changes to operations, strategy and budgets”, we focus specifically on our predictions relating to global tax legislation and regulation as well as risk management and how legislative and regulatory change will mandate transformation.

In the first piece of our thought leadership series, we considered the challenges facing tax, predictions for the Tax Function of the Future and how the current tax function will have to adapt to support and keep pace with the wider business.

The global predictions cover six main areas:
1. Global legislative and regulatory landscape
2. Tax function’s role in risk management and governance
3. Data flow into the tax function
4. Technology automation for tax function analytical tasks
5. Tax function roles and processes
6. The tax professional of the future.

The challenge
The rapidly evolving global tax landscape requires a critical examination of today’s tax function. For many organisations, change may be needed to address capability gaps and better manage risk.
This article highlights how the tax landscape is changing but more importantly, what changes companies may need to make and how to get started.
What is driving change?
Enhanced transparency and disclosure of tax-relevant information are the subject of much debate and becoming the new standards for business. The demand
for greater transparency is reflected
in the agendas and action plans of the Organisation for Economic Co-operation and Development (OECD), the G20, the European Union, and the United Nations.
Companies are voicing concern over how disclosures of transfer pricing strategy, corporate taxes paid, operational structure, and financial information to tax authorities on a country-by-country basis will be interpreted and potentially misused. Further, companies are concerned that such information may end up in the public domain with competitive and reputational implications.
The most immediate and sweeping initiative faced by tax functions is the OECD’s Country-by-Country Reporting (CbCR) recommendation and template. CbCR will have a significant impact on the tax function and how it must engage with the wider organisation to be ready for initial compliance as well as meeting recurring annual obligations. Changes to the tax function also will be shaped by other pending initiatives under the OECD’s Base Erosion and Profit Shifting (BEPS) Action Plan as well as unilateral government actions that could upend existing international tax norms.
What potential impact might I face?
We expect base-line tax administration and other compliance burdens to expand, audits to increase, and there
to be enhanced controversy creating
the potential for increased and double taxation. More pressure will be placed on tax functions to better manage tax and related risks by strengthening the control environment that governs reporting processes. Overall, the tax function
will need to expand its core capabilities relating to data, people, and technology. In addition, due to the potential business and reputational risks associated with many transparency initiatives, the tax function will need to be more engaged with the C-suite stakeholders about
such issues.
What should I be thinking about now and what are the opportunities?
Companies should think creatively and strategically to address these risks while proactively engaging with their broader organisation and potentially the public. Now is the time for companies to create a multi-year plan to expand their tax function capabilities, integrate new reporting requirements, and provide the business case for operational investments. While risk and compliance obligations may be the main drivers for change, there may be several positive benefits to reap along the way such as management having greater real-time insight due to enhanced access to information.

Tax Function of the Future series