One centre, one strategy: Why it could be time to bring tax together

Navigating change in an evolving world

You’re the head of tax for a multinational with legal entities in numerous countries. Your team is small with colleagues located centrally and elsewhere in the world. You’ve always loved spreadsheets, but now you need more.

There are new filing requirements, laws and regulations to deal with, from Pillar Two and Country-by-Country Reporting, to emerging sustainability obligations. Tax authorities are asking for more data than ever, but it’s distributed across the globe, in different departments run by different people, and often in many different formats.

Managing all this in spreadsheets involves sharing a file, following it up, dealing with tons of emails and even more questions. You’re also navigating decentralised management and reconciliation difficulties.

As the head of tax you’re liable, even if you don’t have oversight day to day. So, what do you do?

Between them, Martin Huber and Jonas Reinholdt Albjerg have a vast amount of experience advising global enterprises on tax. Right now, they’re seeing this new norm drive more leaders to consider outsourcing as a way to ease the burden.

But the list of hurdles doesn’t end there.

“Often, the data’s just not available,” Martin says. “With multinationals, you’re usually looking at group-level, or IFRS, data. But for tax you need local GAAP or even tax GAAP, which is why it’s not ready in one, or even three clicks.“In addition to that, if you want to sleep at night, you need an overview of all your tax obligations across all your jurisdictions, and this is shaping the current tax and compliance landscape.”

Jonas sees the complexity from another perspective.

“Since the Digital Tax Administration 2.0 and 3.0, the increased focus on tax controls and reviewing data on the authority side is adding pressure. Some of that is related to internal data quality, and an outsourced model can help shed a light for the head of tax on where to transform. There’s also a push for finance functions to reduce their resources, consider ERP upgrades and look at shared service centres abroad, either owned by themselves or someone else – and this is having an impact on the tax function.

“In Austria, for example, they're very good at issuing penalties directly to the CEO if the organisation isn’t compliant,” Jonas continues. “There’s a bigger risk for the individual as well as the corporation and it’s causing them to ask, ‘should we do compliance differently?’”

Why consider outsourcing?

Whether it’s insourcing, outsourcing or a hybrid approach, working with a trusted provider isn’t just about avoiding the financial and reputational risks that come with failing to keep pace. Bringing the component parts of tax compliance together under one roof can open the door to new and valuable opportunities.

Think visibility and consistency across jurisdictions, more efficient processes, scalability, greater risk management, potential cost savings, richer data plus access to expertise, tech and insights you’re unlikely to have in-house.

Tax leaders can hand over responsibility for their financial data on a daily basis but still have certainty that the tax numbers will be reported on time and accurately. Outsourcing can also free up local teams to set the strategy, a sure way to attract talent, given compliance isn’t always seen as the exciting stuff.

“In Europe, with most tax returns due around 30 June, you could be delivering compliance for many countries at the same time, and you may not have the bandwidth to review everything in full,” explains Jonas. “Having an external expert support you and say, ‘look, here are the outliers and exceptions,’ will help a lot. It means you can focus on more important things.”

If your in-house team is concentrated on compliance, what do you work on for the rest of the year? How do you keep the environment interesting? In the Nordic market, for example, we see some compliance professionals shopping around in the industry, working in-house for a client for just one cycle before moving on, which doesn’t give you consistency.

A global supplier, like Deloitte, will take the same approach across the world, whether it’s for an organisation’s headquarters or subsidiary. And that does provide consistency. For our clients, that uniformity is visible via a dashboard on the Intela central tax platform, which underpins our delivery.

Not only does this provide reassurance to the client, it lowers the risk. It also provides a baseline for us to unlock the data and identify the opportunities, trends and risks, all of which can feed back into the global tax strategy and fuel a cycle of ongoing optimisation.

What about cost? Bear in mind that it will likely be presented as a single amount that spans the life of a multi-year contract, and it’s not just the price tag to consider. You have to balance it with the expense of hiring and upskilling the internal resource you need to meet your increased obligations and the tech it will take to ensure transparency.

For now, one potentially transformative technology that’s grabbing the headlines – AI – is no more than a buzzword when it comes to compliance. We’re leveraging it with Intela, but no one can really claim they’re 100% there yet. Don’t expect that to remain the case, though. AI has found a place in finance and we know how rapidly this compliance landscape can evolve.

Turning obligation into opportunity

The challenge facing multinationals is daunting, and the idea of an expert ally is appealing. It makes it hard to see a future where outsourcing isn’t commonplace, especially for indirect tax compliance and statutory accounting calculations. With the right model it can provide the visibility, control and insight required to achieve real value.

To define the approach, a Deloitte team will explore five key disciplines within the client organisation – data, processes, talent, technology and governance. We’ll learn about where the client is today, work with them based on what we find, then make recommendations shaped, for example, by their business, plans and aspirations, as well as what their peers are doing and the wider market trends.

If it feels like handing everything over is the right route now, it doesn’t have to be forever. We’re seeing clients embracing outsourcing, knowing they want to take things back in-house in a few years. Initially, however, they need a partner that can standardise processes, establish the tech, improve the quality of their data, identify any synergies and efficiencies, possibly upskill their in-house teams, and introduce much-needed governance.

“If you really want to do outsourcing properly, and think about insourcing later on, I always recommend that clients include the outsourcing of statutory accounting,” says Martin.

Jonas agrees: “It’s an area that can easily be taken back because there’s technology for it and templates – clients just need to know the common mistakes first.”

We’re also seeing more instances where transfer pricing documentation is combined with core outsourcing engagements, recognising reconciliation opportunities with transactions we’re leveraging for indirect tax.

Whether it’s for the long haul or in the short term, outsourcing is a two-way partnership. Like all successful relationships, there has to be open dialogue and commitment on both sides.

“It’s mutual between the client and Deloitte,” Jonas explains. “We make sure we understand each other, that we’re aligned and can work closely together. And while we’re getting the compliance done on time, we’ll offer insights – what tax or data risks did we see, what opportunities?

“However, we can’t decide the tax strategy and policy for them. We can write it, but they have to implement it – otherwise, it’s just a document.”

For organisations faced with this reality, there is a way to pilot a path through the complexity. With the right partner, tech and talent, tax can be less of a hurdle and more of a strategic asset – and to future-proof, the time to act could be now.  

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With a multidisciplinary team located across the world and a deep understanding of tech advancements in tax compliance, Deloitte is helping clients to seamlessly integrate data, processes, technology, people and governance to achieve global compliance.

Deloitte’s local delivery teams on the ground in each country are our clients’ eyes and ears. They know their local markets, have extensive experience dealing with respective tax authorities and understand the latest legislative developments.