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. While the number of participants continues to grow, the resulting database is already believed to be the most robust of its kind on a global scale, with input from some 400 multinational tax leaders in more than 50 countries.
In this special report (PDF 1.36 MB) on tax departments within companies based in Latin America, we zero in on data from over 50 tax leaders of organizations headquartered in 12 Latin American countries. The data offers insights into tax departments in the region and how they are evolving in their structure, governance, priorities and performance measures, through the use of technology and more. This report presents a brief overview of selected key findings from the survey data through to fall 2019, and offers some important takeaways for tax leaders operating in the region.
Survey results show that many companies headquartered in Latin America are moving toward greater centralization of tax resources and activities, especially in the area of transfer pricing. However, these companies may have opportunities to further centralize accountabilities and activities — for example, through greater use of shared service centers or other centralized sourcing models. For Latin America-based companies, 40 percent of tax functions are independent departments, directly under executive management, while 35 percent fall within the finance function. This level of tax function independence is greater than the global average, where only 30 percent are separate functions that report directly to senior management and over half remain part of the finance function. In line with global averages, over two-thirds of tax leaders in respondent companies report to the CFO or head of finance (other than CFO), while only 8 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 OECD’s BEPS project. With tax authorities in the region 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.
Are today’s companies prepared to make the investments in people, processes and technology needed to create tax departments designed to meet the challenges of the future? Survey results suggest that, like companies in other regions, the trend toward greater centralization and standardization will continue for Latin America-based companies. Increasing training and education for tax staff members is a top priority for investment, and the number of tax department FTEs is expected to increase for 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.
With Latin American tax authorities leading the world in digitalizing their tax systems, it’s no surprise that companies in the region are responding and also leveraging the opportunities to drive efficiencies by increasing their use of tax-related software. In fact, this is more prevalent in the Latin American region than elsewhere in the world. For virtually all types of tax software identified in our survey, respondents in Latin America were more likely — often much more likely — to use these tools now or plan to acquire it in the near future. Tax leaders in the region also consistently said tax technology would be their number one priority for new investment if they were given additional budget.
In order to adapt and comply with the changing business landscape, tax authorities in Latin America have become frontrunners in digitalizing their tax systems. Tax functions in the region also appear to be more advanced than their global peers, not only in their appetite for and use of tax technology, but also in the ability of their enterprise resource planning (ERP) systems to provide tax data. Overall, Latin American tax functions are more likely to be independent, rather than part of the finance function, and are more likely to have a documented tax strategy that covers tax risk. Though tax risk is a high concern, companies in the region put somewhat less emphasis on minimizing tax risk, and more priority on tax reputation, group tax rate and tax accounting. When looking at tax transparency, Latin American companies generally seem less open about their tax affairs than companies based elsewhere, with only a handful of respondents making their tax information public as a part of their environmental, social and corporate governance (ESG) approach.
Tax leaders can still participate in the survey. By doing so, you will have the opportunity to receive personalized insights into how your tax department compares across key areas. Please visit home.Kpmg/taxbenchmarking or email email@example.com to learn more.