Tax and technology are becoming increasingly intertwined. My previous blog outlined the reasons for this, and how it’s driving the need for a dedicated Head of Tax Technology.
A key responsibility of this role should be to develop a technology strategy for the tax function.
Tax leaders don’t typically benefit from a large technology budget. So, a tech strategy will help you make a stronger investment case to the board for the systems your team needs.
Once budget is secured, the strategy will guide your decisions about what to spend it on. There are hundreds of digital tax solutions out there on the market. It’s all too easy to get side-tracked by products that won’t ultimately help to achieve your objectives – and that won’t deliver ROI as a result.
What should your tax technology strategy cover?
A pre-requisite to your technology strategy is having a clear vision for your tax function. KPMG’s Tax reimagined team have extensive experience of tax function assessments and designing optimal operating models, addressing key questions such as whether to in-source or out-source, how best to leverage shared services or how to establish the correct governance and controls. Having clarified this, your strategy should set out how digital technology will help deliver your tax goals. As such, it will need to present:
- The aims of the business and the finance and tax functions
- The tax function’s current technology environment
- The ideal end-state for that environment, given the goals you must achieve
- Any gaps between the current and ideal environments
- The solutions needed to fill the gaps – and how they’ll help meet your reporting requirements
- The metrics by which your tech strategy’s success will be evaluated
It should also ensure that the required technology can feasibly be implemented; and is compatible with your existing landscape (including any impending system upgrades, such as the migration to SAP S/4HANA). It must also avoid duplicating solutions that are already deployed elsewhere in the organisation.
Formulating your strategy
In my experience, devising a tax technology strategy involves a three-step process:
- Map your stakeholder ecosystem
Identify all of the stakeholders that your strategy will affect or be relevant to.
Start with the tax function itself: the Head of Tax, whose objectives your tech strategy must support; and everyone who will use the technology you invest in. Then look at other functions – finance in particular. Include the CFO and the finance transformation team, to ensure alignment with their strategy and systems.
- Scan the external environment
Your technology strategy should take account of your current regulatory obligations, and any developments on the horizon. Tax authorities are shifting from form-based returns to real-time, electronic submissions. Is your function ready for that? What solutions will you need if not?
Also consider the economic outlook, and the need to drive efficiencies, optimise costs and maximise cash in an increasingly difficult climate. How will that affect your aims as a function? How will it impact the investment you can secure for tax technology, and the case you need to make for it?
- Set your ideal outcomes
Steps one and two will highlight the internal and external challenges your function will face over the next five years or so – and what you will therefore need your technology to do.
With this in mind, decide the outcomes you want from your tax technology. You may need your function to be more efficient, productive, strategic or data-led; or better positioned to support the business’s growth and cost optimisation plans.
The fact is that forward-looking tax leaders are taking a strategic view of technology. Those that fail to do so will find themselves falling behind their competitors when it comes to being equipped for the future of tax.
KPMG has a tried-and-tested approach to creating tax technology strategies and transforming tax functions through digital. Please get in touch to find how we can support your organisation or if you’d like to join our dedicated forum for Heads of Tax Technology.