As a seasoned tax leader, you make key decisions every day to evolve your tax department and keep pace with unprecedented pressures, disruptive technological advancements, heightened compliance obligations and more — all while seeking to demonstrate value within your organization and beyond.
For tax executives of multinational organizations, benchmarking against comparable tax departments can be a powerful tool for reflecting on your current position and planning how to prepare your department for the future. To help, KPMG International conducts an ongoing survey of multinational tax departments which charts the evolution of leading tax departments and identifies operational benchmarks for high-performing tax teams. Below are some of the highlights of the survey from over 90 tax leaders of organizations headquartered in the region.
For Asia Pacific-based companies, the majority of tax functions still fall within the finance function. Fewer than one in five is independent. Over two-thirds of tax leaders report to the CFO or head of finance (other than CFO), while only 5 percent report to the CEO directly.
Due to increased tax authority interest and activity in recent years, transfer pricing risk has been rising. This area is expected to put even more demands on tax teams in the coming years now that many countries have implemented the transfer pricing recommendations arising from the Organisation for Economic Co-operation and Development’s (OECD) Action Plan on Base Erosion and Profit Shifting (BEPS). With tax authorities worldwide now engaged in automatic exchange of tax information, centralizing transfer pricing activities may facilitate better compliance globally with country-by-country reporting and master file/local file documentation requirements.
Many companies in the Asia Pacific region have recognized and responded to the need to demonstrate strong frameworks for tax governance, risk management and tax responsibility. These frameworks often mandate board-level involvement in tax governance. Most tax leaders in the Asia Pacific region say they are well involved in strategic decision-making. However, tax involvement is suggested, but not required, in decisions involving many high-profile risk areas, and some high-profile risk areas may be overlooked.
For Asia Pacific-based companies the trend toward greater centralization and standardization will continue. Increasing the number of tax staff members is one of tax leaders’ top priorities for investment, and the number of tax department FTEs is expected to increase in half of respondent companies. With the notable exceptions of country-by-country and transfer pricing software, however, companies may be missing out on opportunities to drive efficiencies by increasing their use of tax-related software. When we asked respondents what are their top priorities for process improvements in the next 5 years, consulting with business or operating units and process standardization tied as the most common answer.
Finance departments have always been challenged to do more with less, and tax is no different. Today, we see many tax departments working to automate repetitive processes and outsource standard compliance activities so they can focus more on the value-add aspects of the tax function. When done right, their tax professionals can concentrate on interpretation and analysis, decision making and strategy, leveraging their deepest skills and adding more value to the business.
Companies based in the Asia Pacific region may be missing out on opportunities to drive efficiencies by increasing their use of tax-related software. Compliance software is currently the most commonly used tax software. Twelve percent of companies that now use it plan to change their current software, while 24 percent of other companies plan to acquire compliance software in the next 5 years.
Compliance and risk management are clearly the top priorities for today’s tax leaders, and the tax department’s contribution to strategic value now seems to take priority over cost minimization in many areas. Looking ahead, companies based in the Asia Pacific region appear more or less satisfied with their current sourcing models but unsatisfied with the ability of their companies’ enterprise resource planning (ERP) systems to provide tax data.
Many respondents expect their companies to invest in technology changes and, to a lesser extent, tax software. When asked what investments they’d most like to see, however, investments in tax technology tops the list, followed by additional people and process optimization.
In this special report (PDF 1.32 MB) on tax departments within companies based in the Asia Pacific, we zero in on data from over 90 tax leaders of organizations headquartered in the region. The data offers insights into how these tax departments are evolving in their structure, governance, priorities and performance measures, through the use of technology and more.