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Tax reimagined: The evolution of the tax function

Tax reimagined: The evolution of the tax function

Tax reimagined: The evolution of the tax function

Frank Vancamp | Partner,

When I started as a tax adviser with KPMG more than 20 years ago, traditional teams were composed of a partner, a manager, and a staff member (such as myself at the time) - all tax technical experts working for a client’s Tax Director or Chief Tax Officer (CTO), who was in many cases also a tax technical expert.

Over the past decade the profession and the fabric of the tax function has significantly changed. Undoubtedly the worldwide financial crisis forced many governments to take harsh budgetary measures, resulting in spending cuts and tax increases. As a consequence, various initiatives have been taken to increase transparency, cooperation, and exchange of information between tax authorities, and there is far less public acceptance of (aggressive) tax planning.

Meanwhile, greater emphasis is being placed on how risks and data are managed, as well as on how people, processes, and technology can be deployed most effectively.

All this means that the CTO is now faced with more challenges than ever. 

Corporate Social Responsibility

Whereas traditionally the CTO’s main objective was to optimize the effective tax rate, this now needs to be reconciled with the public’s expectation that enterprises contribute their fair amount of tax to society as part of their corporate social responsibility.

This means that enterprises are increasingly considering potential perception and reputational issues when evaluating tax planning ideas.

Increased Performance

We see tax functions under pressure to revise their operating model and explore different sourcing and shared service models. At the same time, the wider technological evolution is creating a lot of buzz around data, automation, and artificial intelligence.

The CTO is confronted with the expectation of translating these developments into their day to day operations to increase the performance of the tax department.

Cooperation with tax authorities

Governments and tax authorities ask enterprises to increase trust and efficiency on both ends by entering into collaborative compliance schemes. Within these schemes the tax payer (enterprise) provides transparency and assurance on governance and sound processes to the tax authorities, who in turn have an open-minded attitude to questions on tax positions from the tax payer. This way, surprises can be avoided in the event of a tax audit.

Transparency requirements

Next to entering into collaborative compliance schemes on a voluntary basis, we see governments and tax authorities imposing more and more mandatory disclosures on enterprises. Think of BEPS reporting requirements, SAF-T reporting in Poland or the fact that invoices can only be validly issued in Argentina after being authenticated by the tax authorities.

Not only do these requirements imply an administrative burden for the finance and tax function, but they also imply challenges on the level of data management and extraction. It is expected that real time reporting requirements will increase globally in the near future.

Circling back to where we started

These developments have not only changed the role of the Tax Director or CTO, but have also impacted the team composition and capabilities of tax advisers serving clients.

Tax transformation, tax management, and tax technology projects all require new skill-sets, and new combinations of different capabilities are now required to deliver services in a successful way. We see this change reflected in our own work, where, depending on the project, our teams are now composed of ERP (Enterprise Resource Planning), IT, Tax Reporting, and Project Management, as well as traditional tax expertise.

Although no-one will deny that enterprises still need traditional tax technical advice, it’s clear that the tax profession is evolving and we will continue to see new types of projects emerging on the horizon. To ensure that your organization is prepared, it’s time to reimagine the tax function.