Successful tax transformation goes well beyond bottom-line results. Here’s how tax teams can deliver more for the whole organization.
The concept of the tax team as a “function” is as outdated as green-shaded visors or the idea that data is some type of warehouse.
For many leading companies today, the tax team—that’s right, the tax team—is poised to be the organization’s new center of innovation. The C-suite especially sees this team as the key to unlocking new value for the business amid a ceaseless swirl of change: evolving regulatory requirements, supply chain gyrations, emerging technology opportunities (and disruptions), and the expanding intricacies of ESG, to name just a few.
The inputs and formulas and bottom-line results are changing by the minute. Surely there’s untapped value somewhere in all those spreadsheets, right ?
Indeed, in our recent surveys of C-level business leaders, 78 percent said they want their tax team to be more strategic and provide value that goes well beyond taxes—and 93 percent planned to prioritize investment to make that happen. But here’s the kicker: Just 35 percent of those same C-level execs rate their tax teams as truly strategic business partners today.
Percentage of leaders who agree the tax function should be used for more than just managing taxes.
Leaders polled who give priority to the tax function when it comes to investment of resources.
Yet, just 35 percent rate their tax teams as truly strategic business partners today.
Source: Tax Reimagined 2021: Perspectives from the C-suite (KPMG LLP, 2021)
We believe that significant gap between big-picture expectations and on-the-ground realities comes down to exactly how companies define that concept of “more value.” In our extensive work and research in this arena, one of the biggest catches we see is that companies too often approach tax transformation through the tunnel-vision lenses of cost savings and productivity gains. And that’s a massive missed opportunity.
Truly innovating on taxes requires an enterprise approach that looks well beyond the spreadsheets and just measuring value in dollars and cents, as we detail in our new report, “Win-win,” part of our Tax Reimagined series.
At first glance, the idea of generating more value for the business is clear-cut and eminently quantifiable: profits, savings, and cost efficiencies, all neatly laid out in the weekly finance dashboard. But in today’s highly complex business climate, that narrow view of “value” just won’t cut it.
Yes, identifying profit and loss savings still matters. But creating a truly future-ready tax operation means looking well beyond financial benefits to deliver advantages for the organization across a much wider spectrum—cultural, competitive, regulatory, reputational, and more.
Because the tax team supports the entire company, their input and insights are critical to every business unit and stakeholder group. And because “value” means something unique to each of those groups, tax teams need to think well beyond traditional financials as they map out their transformation plans.
We have found that successful tax transformation roadmapping starts by taking a step back and thinking about the foundational needs of three core stakeholder groups: the people on the tax team, the communities the company serves, and the business’s operations overall. While this may not cover every stakeholder, it’s a great place to start the planning for your tax transformation journey.
Here’s a closer look at each area.
Finding and retaining quality talent is a challenge for everyone these days, but it’s especially acute for corporate tax teams as they rethink the skills they need for a future-ready tax team. For many companies, there’s a tension point between balancing the traditional accounting skills that have always defined the tax team versus the data and enterprise technology skills that are needed to deliver more valuable insights across the company.
Finding the right balance—and the right people to make it happen—is critical. And as automation and AI continue to take on many of the traditional (and often time-consuming) tasks, the tax team will have more time for cross-collaboration and enterprise insights—provided they have the tools, upskilling, and training they will need.
A managed services solution is another option that can accelerate the “people” transformation, with companies outsourcing much of the rote tax work and repositioning their own team to focus on analysis and insights, while maintaining oversight of the managed services partner.
Increasing tax transparency for the communities your company serves is another key to successful tax transformation. Stakeholders of all sorts—customers, employees, investors, regulators—continue to expect more from the companies they engage with, whether that means fair pay, accountability on taxes, ESG commitments, or just generally being a good corporate citizen.
The growing attention on these areas means that the future-ready tax team will play an increasingly bigger role in corporate reputation and brand-building. To deliver, the tax team will need to be forward-thinking about the data needed and how to work across the enterprise to deliver more transparency overall.
Transforming the tax team while seamlessly supporting ongoing business operations requires another delicate balance. As tax functions undergo a period of reinvention, the team will also need to manage ongoing operations—budgets, costs, savings, tax rates, reporting, and similar.
That’s why enhanced technology and data play such a huge role in the tax team’s journey. Investing in and steadily implementing these new tech and data tools can help streamline the table-stakes business processes while also accelerating the tax team’s roadmap to becoming a broader business partner. To make that happen, the most innovative tax departments are getting more directly involved in enterprise technology investment planning—getting a seat at the table to make a case for the transformative tools and technologies they will need.
Perhaps the biggest challenge to successful transformation of the tax team is that word “function” and the legacy idea that optimizing the team’s role is limited to the impact on the profit and loss statements. But that misses the bigger opportunity. And, more important, it runs counter to external trends already in motion that have the C-suite demanding that tax be a core competency, not a function.
In our experience, companies that are leading the way on truly reinventing the tax team start with that bigger opportunity in mind and develop a clearly defined tax transformation strategy that broadly defines value for all stakeholders. Because, sometimes, the best journeys start by taking one big step back to make sure you know exactly where you want to go.
KPMG research shows that many companies view tax transformation efforts as an exercise in productivity and cost savings, and don’t typically perceive the full possibilities.
Excerpt from the KPMG report “Win-win”, part of the Tax Reimagined series.