Now that many of us are getting used to the temporary new normal with COVID-19, the tax and business leaders I work with wonder what more they can do to keep their people effective and engaged for the unknown period until the recovery begins. They’re also considering whether and how they can carry the solutions in place today to improve their operations in the years that follow.
A catalyst for change
For example, we’ve seen a surge in remote working, telecommuting and virtual meeting practices due to workplace closures. Employees have been quick to embrace it, and this is widely expected to accelerate the trend that was already underway. I also think we may see less business travel in the future, as companies realize how much can be accomplished remotely and see how much they stand to save in travel time and other costs.
Many businesses got their workers up and running at home by leaning into solutions they already had, but weren’t really using. When the closures began, many teams were able to pick up where they left off by fully leveraging document management systems, workflow tools and especially video conferencing. Now that businesses have seen the benefits of these tools in practice, it seems unlikely that they’ll be put back on the shelf when regular activity resumes. Instead, I believe the current situation might become a catalyst for optimizing the use of these technologies in future operating models.
Tax teams face new demands amid uncertainty
Like most functions, many tax teams have had their hands full for the past several weeks. Not only are some of them still figuring out how to work together virtually, they’re also attempting to manage day-to-day compliance while keeping up with the flood of tax measures from jurisdictions aimed at mitigating COVID-19’s economic impact.
When KPMG professionals polled tax and business leaders during a recent webcast on how their organization is ensuring oversight of tax compliance during this time, the most common responses were (in ranked order):
- keeping up with COVID-19 related tax reliefs from governments
- managing filing deadlines as usual
- leveraging technology
- shifting the tax team’s primary focus to compliance.
One-third of respondent organizations said they are engaged in all of the above.
The introduction of the EU Mandatory Disclosure Regime (commonly referred to as DAC6) is another example of legislative requirements which will impact businesses during this uncertain times. DAC 6 sets minimum standard for reporting on certain cross-border arrangements by intermediaries (or in some cases taxpayers) for all taxes of any kind with the exception of: VAT; customs duties; excise duties and compulsory social contributions. As a result of the impact that COVID-19 is having on businesses, some industry trade groups have requested the EU Commission for a deferral of the implementation date of DAC6 from 1 July 2020 to 1 January 2021. It is not clear what stance the EU will take, but even if they do announce a delay in implementation, it is still unclear how it would be implemented practically.
In terms of COVID-19 relief, many tax teams are working the implications of deferred tax filing and payment deadlines, as well as delays for filing financial statements. Getting provisions, liabilities and assets valued is tricky in current conditions. Any reliefs claimed need to be reflected in the financial accounts, and that can affect valuation allowances, reserves and other accounts, especially to the extent decisions were based on forecasting.
After seeing little change in the tax accounting area for several years, tax teams need to manage much of this complex work in a tight timeframe. Tax teams are advised to stay in close contact with their auditors to understand how much precision is needed in these extraordinary times so they can avoid a disconnect between what auditors expect and what companies can produce, for the current quarter and future periods.
How are tax teams coping?
Overall, tax teams seem to be coping with their usual duties and extra demands amid new remote working conditions and heightened uncertainty. In our recent webcast poll, when tax and business leaders were asked how their tax team is performing, the majority of respondents are seeing “somewhat lower performance than usual, but we’re managing.”
How can tax leaders support their team through the weeks ahead to recovery? Perhaps the best advice is to strive for as much flexibility as possible. Both at home and at work, many people have lost some control over how they can respond to things. It’s important to understand the strain your people are under and the other demands they may be dealing with in their personal lives. While you might not have answers, it’s important to make yourself available to foster the mindset that we’re all in this together. In some cases, you might also need to tap resources from other functions or externally to keep compliance on track for the near term.
Things will continue to change as COVID-19 runs its course, restrictions are lifted and economic activity returns to all sectors. New demands may seize attention, so previous top priorities may need to take a back seat. In the weeks and months ahead, leaders would do well to monitor their environment, keep their minds and options open, and be ready to change priorities as conditions evolve and ultimately improve.
1. 14 April 2020 Webcast: Managing tax compliance through and beyond COVID-19: The future of tax and legal – a global perspective, KPMG International.
Speakers included: Michelle Quest, Head of Tax and Legal Services, KPMG in the UK; Sean Bloodwell, Global Head of Compliance Management Services, KPMG International; Brad Brown, Global Head of Tax Technology, KPMG International; Jay Ayrton, EMA Head of Global Compliance & Transformation, KPMG in the UK; Jenny Clarke, ASPAC Leader of Tax Transformation and Compliance, KPMG Australia;
Lachlan Wolfers, Global Head of Indirect Tax Services, KPMG International.