Tax: From cost center to value creator
Leverage new tech-driven capabilities to unlock enterprise value.
Estimated read time: 3-4 minutes
The tax team isn’t just finding its voice these days. It’s getting a seat at the table in company strategy conversations.
It’s an essential new role as the tax function continues its transformation from cost center to value driver. Amid increasing regulatory intensity, rising geopolitical risks, and complex new tax regimes, the team now has a crucial role in directing business decisions and ensuring long-term success.
The driving forces behind this reinvention include the tax team’s growing role in strategic planning for areas such as ESG and M&A strategy, as well as powerful technologies such as generative AI (GenAI) that improve the efficiency and effectiveness of tax operations. These are among the key themes that we detail in our 2024 Chief Tax Officer Outlook, a new KPMG survey of 300 CTOs at large US companies across 22 industries.
Like any transformation, there will be bumps ahead. It’s important that tax departments remain collaborative, agile, resilient, and data driven, and that leaders be sensitive to the impact of new technologies on talent and culture, according to the tax leaders we surveyed.
Here’s more about what we learned.
Tax meets tech
GenAI gets a lot of (deserved) buzz, but the CTOs in our survey were equally bullish on a range of tech-driven enhancements to automate and accelerate the day-to-day work of tax, manage heavy workloads, and stay on top of expanding complexity.
Indeed, new or upgraded technology emerged as a key priority. Tax departments are increasingly leveraging advanced tools to automate compliance, streamline operations, and provide future-looking insights.
Among the CTOs we surveyed, 44 percent are implementing tax software solutions, 43 percent are integrating financial systems, and 39 percent are adopting data analytics tools. Why? More than 40 percent want to free up their teams for strategic activities—which was a goal of less than a third of those we surveyed the previous year.
They’re also embracing GenAI in four key areas:
This includes data capture, computation, and reconciliation, liberating tax professionals from the routine so they can add greater value beyond compliance.
GenAl can help with discovery, quickly analyze reams of information in multiple formats, generate reports, and facilitate consistent communications with tax authorities.
Large multinational companies need to rapidly identify and make sense of the latest developments across the globe. GenAl models can read, translate, and accurately summarize relevant documents in seconds, giving tax practitioners actionable information at speed.
GenAl is especially adept at identifying patterns and trends in data that may not be immediately apparent to human analysts.
When talent gets taxed
Many factors have been driving the ongoing evolution of tax operations: budget pressures, regulatory complexity, increased data requirements, C-suite expectations, and changing demands of business.
Today, technological disruption stands above the rest. As a tech-centric future of tax unfolds, it raises a critical question: What operating structure and skill sets will fully unlock new-found capabilities, enabling tax functions to turbocharge efficiency and create value beyond compliance?
Tech-driven transformation is never fast or cheap, often requiring knowledge and skills not available in-house. Speedy and sustainable reinvention will require realigning service delivery models, addressing talent gaps, and embracing new ways of working.
To that end, nearly a third of the CTOs we surveyed are exploring cosourcing, outsourcing, or tax-managed services, saying that these approaches get them farther, faster—and enable them to better focus on strategic activities that add value.
Headwinds (and opportunities) abound
At the same time that tax departments are becoming more strategic, they’re also being called upon to navigate an increasingly complex and evolving global landscape. From the myriad Pillar Two tax implications to managing ESG compliance across multiple jurisdictions, tax departments must stay abreast of persistent regulatory changes, adopt best practices, and ensure compliance while mitigating risk.
The CTOs we surveyed say geopolitical uncertainty poses the most significant challenge to the tax function (60 percent call the threat “high”). But there’s a long line of business risks right behind it: macroeconomics (52 percent), ESG regulation and compliance (49 percent), and data security (47 percent).
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How these challenges play out will have profound effects on tax data needs, exposure, risk management, and planning, especially for companies that operate globally. Tax leaders must stay informed, embrace technological advancements, and foster a culture of innovation. By doing so, they’ll meet the challenges of today while proactively shaping the tax landscape of tomorrow.
Determined to spend less time on compliance and more on strategic initiatives, tax leaders are not easing off the transformational gas pedal. Further reinvention—with tech as a key enabler—awaits.
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