Swiss tax functions kick off journey to next level TOM Swiss tax functions kick off journey to next level TOM

Increasing complexity in tax regulations and internal demand for more efficiency necessitate a paradigm shift in companies’ tax and finance functions. However, as our recent Survey shows, Swiss companies are hesitating and risk missing out on the benefits of overhauling their tax operating model.

The global trend towards increased tax transparency, reporting and compliance requirements shows no sign of abating, with the latest developments from the OECD’s Base Erosion and Profit Shifting framework (BEPS 2.0) and the EU’s Public Country by Country Reporting initiative fresh in the minds of tax leaders and professionals alike.

At the same time tax functions are challenged internally to operate more efficiently, reduce costs and provide faster, more reliable data to support operational and strategic decisions.

One solution is to rethink tax processes and make better use of technology, enabling organisations to successfully maximise their efficiency whilst minimising their costs at the same time – in short, to reimagine the tax function.

As concluded in a previous blog, the current disruptive environment amid the COVID-19 pandemic provides the perfect, but also overdue starting point for companies to reorient their tax function and digitalise and automate its processes. Nearly two years into the pandemic, however, our survey implies that COVID-19 has not initiated the expected digitalisation boost in tax functions.

In KPMG’s Tax Function Benchmarking Survey of Swiss companies in 2021, Heads of Tax and Finance were asked about the current state and future plans of their respective tax functions.

• Even though transformation seems to be high on the agenda of Swiss companies, half of those surveyed had not yet put a plan for the transformation of their tax function into action. The majority of respondents declared they are preparing for the future, but there is still progress to be made in order to be able to meet prospective compliance obligations such as digital data exchange and real-time reporting. 
• Of the surveyed companies, a large majority either has a mix of insourcing and outsourcing or fully insource their compliance activities. 85% of organisations were dissatisfied or only somewhat satisfied with their current sourcing model, the top challenge being overly manual processes. 
• Over 90% of companies surveyed described their tax department as not digitalised or only partially digitalised. Transfer Pricing and Indirect Taxes were the two areas where respondents saw the greatest opportunities for digitalisation. 

Given the constant evolution of the regulatory environment and increasingly digital future, no change is not a viable option. However, with regards to transforming their tax function into a digitalised, value-adding business partner to its stakeholders, Swiss companies are not where they want to be, nor where they could be. We recommend Heads of Tax to:

1. Define your vision for the tax function and review and document your tax strategy, ensuring it is aligned with the overall business strategy.
2. Undertake a maturity assessment of your current operating model: where are the pain points in terms of organisational set up, processes and technology – where are the risks, inefficiencies and high costs?
3. Reconsider your sourcing options, especially for low value-adding activities (e.g. compliance), to free up resources for other tasks.
4. Develop a roadmap, detailing the individual steps required to transition from your current state to your desired future state operating model.
5. Identify a suitable and balanced set of KPIs that reflect your tax strategy and which will drive desired behaviours to boost the performance of your tax function.

By taking the above 5 steps, Heads of Tax can start to reimagine their tax functions and design a target operating model that can unlock value, reduce costs and improve the quality of their tax function. The potential benefits are significant, so why wait?