Are corporations missing the boat on new tax technology transformation?
Even before the global pandemic brought a myriad of new challenges, corporate tax departments were already facing mounting pressure from within.
Wielding the mandate to do more with less, corporate management strongly pushed their tax departments to increase efficiencies, lower costs, and produce better results that would help the companies’ bottom line. Often, acquiring new technology was rightfully seen as a salve to these problems — and that’s not surprising. Technology can promise better efficiency by streamlining repetitive tasks, a faster analysis that allows for smarter decision-making, and ultimately, of course, greater cost savings.
You can see a recent Thomson Reuters webinar about how pressure on corporate tax departments is pushing them to do more with less.
Yet, in the recently published 2020 Corporate Tax Departments Survey: New Technology Demands New Skills & New Attitudes, published by Thomson Reuters and Acritas (now part of Thomson Reuters), tax department leaders saw the implementation of new technology as one of their biggest challenges. Indeed, when asked to identify key challenges,30% of corporate tax department leaders cited adopting new tax technology as a key challenge, just behind keeping abreast of tax reform and regulatory changes (32%), but more than twice the percentage of the third-highest ranked challenge, promoting process efficiencies (14%).
Clearly, new technology is worrying the minds of many corporate tax department leaders.
And that is somewhat understandable, because finding, acquiring, and implementing new technology can be a weighty decision for many tax departments, and the pitfalls involved can be intimidating. Will the new technology work well with what the tax team already uses? Will tax professionals use it properly? And, most importantly, will the effort be worth the cost?
Digging deeper into the survey showed that a surprising number of respondents said that their current technology was not being used to its full potential because, in many cases, the tax teams lacked the skills, training, external support, and even the time to use their existing technology properly. Interestingly, the current COVID-19 pandemic brings with it additional pressure to ensure that current technology becomes fully integrated and operational to aid the new remote working environment, even as planned new technology projects are being put on hold for now.
The survey points to two key ways that corporate tax departments could get a better handle on their utilization problem: Addressing the gap in new technology skills among their tax team; and creating a new role for a tax technologist who could lead the team’s effort to implement and properly utilize their technology.
Addressing the skills gap
While just 9% of survey respondents said a lack of resources was a major challenge, more than half (51%) said they felt their tax departments were under-resourced. Primary in that consideration was that corporate tax department leaders saw significant skills gaps among their team, including about one-third of them who felt their teams lacked technological skills.
And as the survey pointed out: “Unfortunately, this translates into suspicion and skepticism around the value of the technology itself.” Fortunately, there are several ways in which a tax department can address these skills gaps among their team.
Listen to a Thomson Reuters podcast about how corporate tax departments can address the skills gaps among their teams.
First, it’s crucial that team leaders take a step back and assess their teams’ current skill set and then create a long-term strategy of improving those skills that may be lacking. Of course, given the time and workload pressures that team leaders are under, long-term strategic thinking is a luxury that many feel they cannot afford.
However, as the survey pointed out, this is exactly what they need to do.
Research on department success — not just among corporate tax departments, but in many other industries — shows clearly that success lies in people as much as technology. However, if there’s a skills gap that is leaving technology under-utilized — as many corporate tax departments are saying — then, those departments not operating as efficiently as they could be.
While it may be difficult during these trying times, the need to develop and communicate a clear strategy, enact needed skills training, bring in new skills as well as new technology, and measure the effectiveness of work processes is more important than ever. It will, in fact, greatly improve corporate tax departments’ ability to deliver more value to their corporations while bringing greater job satisfaction to their own teams.
One silver lining — and potentially a great place to start — is among new hires, which demonstrated considerably less of a skills gap when it came to new technology, according to the survey. In fact, just 11% of respondents said they saw a technological skills gap among their newer hires.
The role of the tax technologist
The second way corporate tax departments are trying to solve their technology utilization problem is by creating a new role of tax technologist — one that combines tax expertise with technology skills.
Indeed, among the key findings of the survey, respondents noted that the role of tax technologist is increasingly important, and that tax departments need to decide whether to teach technology to their tax professionals, or hire technologists who then can be taught tax strategy.
There was, in fact, an interesting split among tax departments over the preferred path to employing a tax technologist. While most favored re-skilling a tax expert in the art and science of data analytics, artificial intelligence, and other technologies; some tax departments instead favored training technology experts in the rigors of tax strategy. Other department leaders said they favored bringing in pure technologists to sit in with the department and focus on developing the team’s overall technological expertise.
Whichever method the tax department ultimately deploys, the evolution of the role of tax technologist may be the game-changer that corporate tax departments need to overcome their unwillingness or inability to utilize their technology to its fullest extent.
As the report suggests, corporate tax departments need to take a strategic approach to their technology investments — both in product and in personnel — which would allow them to better utilize their technology and develop the skills needed to get the full benefits from it.