Today’s tax functions operate in an environment of rapid, continual change and technological innovation.
Externally, tax authorities are increasingly demanding real-time (or near-real-time) compliance, which requires tax processes to be integrated into finance systems. At the same time, new regulation is coming onstream, such as BEPS 2.0 and E-Invoicing.
Internally, finance transformation is disrupting tax functions, driven by the need to replace or upgrade systems – for example, by migrating to SAP S/4HANA. This changes the role of technology in tax compliance, affecting the systems tax teams rely on for data, and how those systems interact with tax authorities.
Heads of Tax must be confident that their teams can respond to this challenging new reality. That will mean addressing three urgent priorities:
- Leadership. A dedicated Head of Tax Technology should be in place, reporting directly to the Head of Tax, and sitting on the Tax Leadership Team.
- Strategy. He or she should quickly formulate a tax technology strategy, setting out how tech will help deliver the organisation’s tax strategy.
- Roadmap. A three-to-five-year roadmap should then be developed to support the tax technology strategy and finance transformation programme.
I will look at the strategy and roadmap in my next two blogs in this series on tax technology. For now, let’s explore the need for a Head of Tax Technology.
The business case
Dedicating a leadership role to technology means that somebody is responsible for ensuring your tech investments improve outputs, risk management and operational efficiency.
For example, a large retail firm I work with found that deploying the right corporate-tax compliance tech reduced four weeks of manual effort to just two days.
That sort of efficiency gain has knock-on advantages. It leads to more engaged and productive employees and frees them up to work on more strategic and collaborative activities.
Ultimately, the result is to help move tax operations from retrospective compliance to a future-focused, insight-driven model.
I’ve seen that transformation happen at KPMG over the past ten years or so. Early on in my career here, I spent a lot of time managing and transforming data from clients’ tax packs. That role no longer exists, as we’ve moved to use Digital Gateway: a portal that integrates tax data with our tax-return software.
That allowed me to focus on my strategic role as Chief Technology Officer for Tax & Legal, by driving our own tax transformation journey forward.
Behind the curve
In a complex climate, not appointing a Head of Tax Technology will expose the tax function to a series of risks – including:
- A lack of clear accountability for responding to regulatory change. That could expose the business to the risk of financial penalties for non-compliance – or even leave it unable to issue invoices in some countries.
- Not bringing tax processes into your finance transformation. Data and systems that you rely on for compliance could become unusable for tax purposes as result.
- Difficulty securing investment in tax technology. If there’s no cohesive tax technology strategy, you can’t allocate budget against it.
- Wasted spending on initiatives that duplicate what’s being done elsewhere in the organisation; or that will be made obsolete by future changes to the business.
- A weak employee value proposition. Young, digital-native tax professionals have high expectations of the employee experience – key to which is the technology they have to work with.
Put simply, if you’re not keeping ahead of change, you’ll quickly fall behind. So my advice to you is this: if you don’t have a Head of Tax Technology, appoint one fast.
There’s no one-size-fits-all profile for the ideal Head of Tax Technology. But you’ll want your candidates to have some or all of the following qualities:
- experience of working in the tax department, and a good understanding of tax processes
- a demonstrable interest in technology – somebody who's automated part of their job away using Excel macros might be a good place to start
- the strategic thinking required to develop a coherent plan for the function, which will maximise the return on investment in tax technology
- experience of building a business case for transformation – including championing technology adoption and tracking the value realised
Once you have a Head of Tax Technology in place, make sure they have sufficient visibility and influence within the business. That begins with a place on the Tax Leadership Team. You may also want to consider a 'dotted line' to other technology or transformation functions within the company.
As this is a unique role, and often a new one, it will need to be clearly defined. And you’ll need to think about how to help the individual develop their skills. Peer networking events like our Head of Tax Technology Forum are vital here, as they bring Heads of Tax Technology together to share their experiences.
You’ll also need to create a distinct performance-management framework, with different KPIs to those for your Head of Tax or other senior technology roles.
And finally, give them the material support necessary to drive real change in your tax function.
The future of tax looks very different to the present. So it’s crucial that you act now to prepare your tax function. Technology will be central to that – which is why appointing and embedding a Head of Tax Technology should be at the top of your to-do list.
Get in touch if we can help you make the case for a Head of Tax Technology; or to speak to members of our forum who are already in the role.