The mounting stress experienced by tax professionals related to the tax provision process is a double-edged sword. It can cause anxiety, but may also present tremendous opportunities, according to panelists for the Thomson Reuters webinar:
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“From Compliance Necessity to Strategic Advantage: How can you master the tax provision process?”
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“The tax profession, overall, is facing some significant changes,” says Kelley Lear, Vice President, Partnerships & Alliances, Thomson Reuters, pointing to data complexities and changing regulatory relationships.
Tax professionals are also going to be more involved in financial transformation, cloud discussions, and other key decision-making discussions. “Tax, more than ever before, is going to need a seat at the table,” Lear said, noting that there are ways that tax, finance, and accounting professionals can take the opportunity to embrace technology, develop new skill sets, and get a much more strategic role within an organization.
Ensuring quality data
The impact of data quality on tax professionals cannot be overstated.
Frances Cesar, Vice President and Head of Tax – (Customer), Akamai Technologies, says much of the focus on data right now at her firm is related to the Pillar 2 legislation and the information required for the global minimum tax. “If you’re looking through the rules and looking at what’s required, the big thing and the big focus is your country-by-country report and safe harbor calculations.”
“We’ve been preparing these country-by-country reports for several years now, but that information wasn’t really going anywhere. It was really a reporting requirement but it wasn’t being used for any tax calculations or really driving any decision-making within the business,” Cesar says. “But now we have to look at that because the safe harbor calculations are really going to drive whether or not you have the requirement to file a global minimum tax and actually pay one of the QDMTTs, IIRs or UTPRs,” Cesar says, referencing the Qualified Domestic Minimum Top-up Tax (QDMTT), the Income Inclusion Rules (IIR), and the Under Tax Payment Rules (UTPR).
Cesar says she and her colleagues have been focusing on how the data is gathered and whether it’s qualified. “There’s a lot of rules out there related to Pillar 2 that people might not have understood that you need to be following and making sure you have qualified data,” she says. “The initiative that we’ve been going through is just finding out how do we prepare the country-by-country report.”
However, many other tax leaders are relying on their country’s controllers. “All countries might have a different way that they’re gathering the data. And you need to make sure it’s qualified.”
Emphasizing data control
The global minimum tax process is complicated and firms need to prepare appropriately, says Barbara Torzewski, Senior Manager, Tax, Technology & Transformation, EY. Firms may want to establish a process to centralize the information and have a ‘data controller,’ someone responsible for making sure everyone gets their information from the same spot.
“You really want to focus on where is it coming from, who is pulling that data, where are you storing it, and it’s all about validation at the end of the day—making sure you understand that data and making sure it’s good data you’re utilizing for your calculations,” Torzewski says.
Panelists recommended using the right tax tools, such as the Thomson Reuters Global Minimum Tax Platform which includes CbC, Global Minimum Tax, the International Tax Calculator and EAT/Connect to manage the data collection and workflow around the end-to-end process and integration with tax provision software to help manage the data appropriately. This would allow tax professionals to focus on the actual calculations
Equally important is pairing the tools with proper policies so that “you don’t have crazy workflows going around,” Torzewski says.
The art of the possible
For Torzewski, being able to display your data in different ways for different audiences is crucial. “How can you get your data to show the art of the possible? What can we do with this data that we have? It’s storytelling with data.”
Your reviewer is “going to be looking at this data for various things other than compliance” and “now you’re taking that data and being able to do things that you want to do in the future with it,” she says. “You really want to think about what your end game is… and get to this next level.”
Cesar adds that she uses “planning as an opportunity sometimes to say ‘look what our team did. We can show you savings. Can we use the savings to help get ourselves some of these tools that can be expensive?’”
The role of Artificial Intelligence in the tax provision process
Many tax professionals are “afraid that AI is going to take over their job and I don’t think that’s true,” Cesar says. It will enhance their jobs and “make you more efficient at writing some of these memos or some of the analysis that you need to do.”
Additionally, Cesar says that AI is discussed in every meeting she has. “We are being asked to actually ask our vendors how are they using AI and how is it going to enhance the products we’re purchasing from them,” she says. “If you’re going to be using something that has AI developed in it, you want to make sure you fully understand the data that you’re getting and how it’s getting collected and how you’re using it before you make any changes in your process.”
What is the future of tax provision?
Every few years, organizations should do a health check, Cesar says, so they can ensure they’re effectively using the tools available to them. “Get a trusted advisor, get your team, and get in a room, strategize, and discuss how you are using the tools that you have, and check you are optimizing, and being efficient in all the ways that you can”
Torzewski adds that “when it comes to tax provision, it’s never going to end. All of these rules, all the change, it’s never going to end” and it is “really hard not to have the technology you need to keep up with all of the changes… you need to be ready for it.”
Mastering the tax provision process is crucial for tax professionals because it ensures compliance and provides a strategic advantage in their organizations. By embracing tax provision software, tax professionals can navigate the complexities of tax regulations, drive informed decision-making, and enhance their efficiency, ultimately maximizing their impact and value in the ever-changing tax landscape.
From taking advantage of opportunities to avoiding potential missteps, embracing tax technology is the foundation for adapting swiftly to tax changes.
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Learn more in our white paper on “Automating tax provision: The power of technology”
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