Tax teams are taking on an increasingly strategic role within today’s businesses. However, given the rapid pace of change, many executives are still unaware of the untapped strategic potential within these teams. Watch Now: Tax reporting in a changing world
Some organizational leaders may still view the tax department as a group of technicians – specialists responsible for tracking changes in the law, calculating tax liability, and filing the necessary paperwork. But tax teams often play a compelling strategic role, provided they take a proactive approach to staking out a meaningful position within the company, routinely adding value, and articulating that value to executive management and others throughout the company.
A recent poll conducted by insightsoftware reflected this dichotomy. We asked webinar attendees to report how their tax department is viewed by other coworkers. Forty-five percent said they are seen primarily as reactive or compliant participants within their companies. That’s a far cry from the well-valued stature that tax teams are able to achieve when they’re equipped with the right tools.
Tax Teams: Stepping into a Strategic Role
If tax teams are viewed as mere cost centers, it can be difficult for them to secure executive backing for strategic projects. Improved software, for example, can be a keystone investment for tax teams aiming to reach higher and achieve more.
Lacking that executive sponsorship, a tax team will not have access to the right tools; they’ll be unable to fulfill their strategic function effectively. That, in turn, leads to a cost-center mentality, it perpetuates the image of the tax team as a collection of paper-pushers and makes it even less likely that they’ll achieve the strategic focus and recognition necessary to secure investment.
How can tax teams break out of that cycle?
There are several trends at play that may provide an answer. The first is the drive toward agility and responsiveness that arose from the abrupt changes imposed early on in the recent pandemic. The other is the coming transformation in global taxation brought about by the adoption of BEPS by over 130 OECD member nations.
Tax Teams, Agility, and the Pandemic Effect
When the pandemic arrived on the scene in early 2020, governments around the world swung into action. They provided generous aid packages consisting of loans, grants, and various kinds of tax allowances.
For most businesses, that meant gathering information rapidly and filing the necessary paperwork to substantiate expenses. The Paycheck Protection Program, for example, required a detailed analysis of payroll expenses; but it also called upon businesses to back out the salaries of certain high-earners from those reports. Companies also needed to calculate occupancy expenses like rent and utilities to qualify for loan forgiveness under the PPP program.
This analysis was critically important for most organizations. It was required to qualify for funds, and it needed to be done as quickly as possible. Accuracy was critical. To top it all off, someone had to pull together all of the numbers at an especially chaotic time. Businesses were seeking alternative revenue streams. They were reconfiguring production lines and delivery methods. It was an all-hands-on-deck scenario for the decision makers in most businesses.
Agile reporting was the key to successfully getting through the pandemic, especially in those early weeks and months. It was a prime example of how teams can use agile reporting and smart tax strategies to help their executive management teams act decisively. We live in unprecedented times. Those who can proactively facilitate greater business agility will play an increasingly strategic role in their respective organizations.
BEPS Pillar Two and a Re-Making of Global Taxation
As the approach to global taxation shifts dramatically, tax teams have an even more focused role to play in setting strategic priorities for the organizations they serve. BEPS, which stands for “Base Erosion and Profit Shifting,” is a set of rules and standards established by the Organization for Economic Co-operation and Development (OECD) with the aim of overhauling global taxation.
BEPS encompasses two so-called “pillars.” Pillar One will initially only affect very large organizations. Pillar Two is much broader and sets a minimum baseline for corporate taxation such that multinational businesses are no longer incentivized to shift profits from higher tax countries to low-tax nations.
This means significant changes are coming. The OECD describes BEPS Pillar Two as “a radical shift in the tax landscape.” For companies looking ahead to their tax reporting strategies for the next calendar year, now is the time to implement new systems and processes.
Challenges Equal Opportunities
For tax teams, these challenges also create opportunities. As the world demands greater business agility, and as BEPS promises to radically shift the tax landscape, tax departments have a powerful case for change. With the right tools, tax teams can address these challenges head-on. At the same time, they gain the assets they need to shift their position in their respective organizations from tactical and reactive to strategic and proactive.
The best way for tax teams to become more strategic is by first mapping out the operational limitations that have, in the past, compelled them to focus on compliance. After these roadblocks are identified, it’s easier to explain what can be done with better support and tools.
In many companies, for example, manual processes consume far too much time and energy. By investing in the right tax and reporting software, those processes can be automated. Tax teams can spend less time on procedure and more time on strategic analysis. They can also increase the cadence at which they evaluate the company’s positions, which in turn makes the organization more responsive to a shifting business environment.
Longview Tax from insightsoftware enables tax professionals to automate many of the tax reporting processes that currently consume much of their time. With these considerable time savings, they can use the product to map out different scenarios with actual and forecasted finance data to make their own strategic suggestions from a tax perspective.
This approach has already been successful in many organizations. A large number of insightsoftware’s webinar attendees (67%) reported that they faced particular strategic barriers within the realm of tax and finance forecasting . If an organization struggles with its strategic forecasts, then it only makes sense for the tax team to push for executive backing for a solution that boosts these capabilities.
The tax team’s work often hinges on the quality and timeliness of the finance data that underpins their forecasts. Better integration with finance systems, finding ways to improve the consolidation process, or increasing the granularity of the data available to work with will provide both the finance and tax teams with enhanced collaborative capabilities based on high-quality, accurate data.
Tighter collaboration between tax and finance teams inevitably leads to better forecasts and far more opportunities to recognize the invaluable strategic impact that tax teams can have on their organizations.
For a visual breakdown of the insights learned from insightsoftware’s recent polls..
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