2021 Corporate Tax Report
Tax departments and technology – how do they measure up?
Transitioning to a digital tax department
Tax reforms, acquisitions, political and economic changes – these are just a few critical challenges that put a strain on corporate tax departments. The global pandemic placed yet another burden on teams.
According to the respondents of our 2021 State of the Corporate Tax Department survey, tax teams have employed a variety of strategies to better cope with resource gaps. To comply with new and changing tax regulations, most felt they were going to face significant tech, process, people, and resource challenges.
technology
Addressing resource gaps in tax teams
Tax departments turned to technology to save time, reduce cost, and boost efficiency. In fact, those with successful technology deployments also talked about the reduced risk of errors, high data accuracy, and improved reporting. What’s more, better organized data provided more control and more compliance.
Unfortunately, not all tech deployments are equal, and the potential benefits were not always fully realized. Many tax departments lacked the time, budget, and skills to effectively deploy technology.
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45%of all respondents indicated that they will be introducing technology and automation to address resourcing issues
Tax takeaway
Technologies that make the most positive impact are those that create efficiencies and improve data quality. When making investments in technology, make sure you provide sufficient budget to implement the technology successfully, update processes, and train existing team members.
sophistication
Evaluating the tax department’s relationship with technology
Our technology sophistication model identifies five types of different relationships between tax departments and technology.
We asked respondents to categorize themselves on a scale from “chaotic” to “predictive.” Over half of tax departments placed themselves in the two least sophisticated categories – chaotic and reactive. Just under one-fifth considered themselves to be optimized or predictive.
Tax departments that categorized themselves as sophisticated felt right-sized in terms of resources. Conversely, almost twice as many chaotic and reactive departments felt under-resourced (when compared to optimized and predictive departments).
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32%of respondents placed their department in the reactive category, followed by 21% which categorized their department as chaotic.
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ChaoticUsing email, spreadsheets, system reports, and manual processes to collect, review, prepare compliance, and respond to audits; and respond to audits; individual tax departments work independently.
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ReactiveUtilizing tax department databases, some third-party software with automated feeds, but not connected to enterprise data or departments across the company.
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ProactiveIntegrated with enterprise data and leveraging tax automation software for file-ready compliance, storage of documents and data, and formalized coordination and processes with other departments.
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OptimizedAnalytics-driven decision making, reporting available as needed, and tax workflows are completely automated across the enterprise.
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PredictiveLeveraging rule-based technology and embedded enterprise data for automated workflows, alerts, pre-audit analysis, and reporting across the enterprise; proactively managing risk and regularly advising key decision makers with analysis.
Tax takeaway
Working with spreadsheets and other manual systems is burdensome, slow, and fraught with risk of tax exposure. But for many, it is still the day-to-day reality due to a lack of awareness of the alternatives and time constraints. This puts tax departments in a difficult catch-22.
However, the stakes are now too high in an increasingly complex and changing sector to stand by and do nothing. If tax teams want to solve their resourcing and efficiency challenges, they need to take proactive steps toward becoming more technologically sophisticated.
benefits
Relieving the pressure through tax technology
For those that have made the leap in their digital capabilities and advanced technologies, there is a significant step up in feeling right-sized. Still, it takes considerable investment to deploy technology effectively, streamline processes, and cultivate advanced technology skills amongst your team.
Our report revealed that optimized and predictive departments were spending three times as much per dollar of revenue on the tax department budget, when compared to chaotic and reactive departments.
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54%of respondents cited direct cost savings as an important argument for making the business case for technology.
Tax takeaway
Budgets are tight in 2021, and this has created challenges in securing resources for new technology implementations. Some struggled to quantify the benefit or return on investment. And it’s not just the cost of the technology itself; resources need to be made available for training and implementation. However, the tax departments that persevere will be better equipped to meet their strategic goals in the long run.
Further topics we explore in the report
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