Tax in a transparent world

The infusion of technology into every aspect of our lives has ushered in an entirely new age of transparency. When we order food, hail a ride, or buy groceries, we can track where things are at each step of the process. The world has become accustomed to and embraced this level of visibility. The tax function is no exception. The public and taxing authorities want to know who pays how much tax, when, and where. This has a growing and material impact on companies’ reputations and brand perceptions.

Working in a completely transparent world can feel like being in a glass house. As the glass house analogy becomes a reality, tax leaders should explore how to use technology to get their houses in order with a focus on data quality, investments, and operating models.

In this study, 70% of tax leaders predict that revenue authorities will have more direct access to their systems within three years.

Data quality & NextGen ERP

Key insight 1: 

NextGen ERP - Data access for Tax transparency

Our survey revealed Tax leaders are leveraging NextGen ERP projects as a gateway to both team with finance, and to gain access to tax-sensitized data via revamped, standardized processes and integrated systems. It is essential for tax leaders to understand their data requirements and existing data quality challenges, and then make their voices heard—alongside other department leaders in their organization—in the decision-making process that informs the design of new ERP systems.

Of the quarter of those surveyed where a NextGen system is up and running, nearly eight in ten (78%) played a lead role in shaping the system’s design.  

Confidence levels in the benefits of ERP upgrades are high, and particularly the first movers, who believe that their upgraded ERP system will enable them to enhance straight-through processing of data for tax processes, and to embed controls to solve existing data quality issues. There is also substantial confidence that such systems will help tax teams cope with evolving digital tax administration requirements.

Those companies already working in a modernized ERP system see benefits that stretch beyond compliance and reporting. For example, 60% of this group describe their ability to conduct sophisticated scenario modeling as “very strong” relating to the OECD Pillars 1 and 2 changes. This is almost three times as many as in companies that have not yet implemented a NextGen ERP.

Gaby Bes, Head of Tax and Customs, ASML

Investment

Key insight 2:

Technology fueling Tax transformation

The survey also showed that as the tax function undergoes transformation, tax leaders are more involved in technology discussions—with finance, with IT, and even with senior management—than they are likely to have been five or ten years ago. It is imperative that they are not only involved but influential. This is particularly true when it comes to critical decisions being made by other budget-holders about things such as ERP modernization and enterprise data strategy.

Gaby Bes, Head of Tax and Customs, ASML

Many in the survey are trying to exert a more significant influence over their function’s technology destiny. Nearly half (48%) say they take a proactive and expansive approach to technology strategy, including redesigning their entire digital architecture. This represents a step change in the attitudes of tax professionals to technology transformation. Another 29% indicate they are proactive, albeit relating to specific systems and processes rather than the technology architecture as a whole.

Their efforts to exert influence appear to yield results. Almost two-thirds (63%) of the respondents indicated they have significant autonomy over tax technology strategy, although conditions to exercise influence differ in every organization. Some of the executives interviewed say their influence is limited, with finance or IT holding a tight rein. And over one-third (37%) of respondents with autonomy over strategy have only limited control of their CapEx budget.

Since tax functions typically do not hold the purse strings, it will be even more important to capitalize on major finance transformation projects which could impact nearly every aspect of their work. Tax must have a say in the design of new systems.

Senior management at many businesses understand the urgency of meeting digital tax administration and other emerging obligations.

Tax leaders should use this environment to create a compelling business case for investment in technology modernization for their departments. Draw on the momentum of the moment to overcome what may have been obstacles in the past.

Eleanor Macdonald, Tax Technology & Transformation Lead, Anglo American

Operating models

Key insight 3:

Transforming for a transparent world

Survey respondents revealed there is no single path to an optimal sourcing strategy for tax. Different business models, levels of technology maturity, digital transformation strategies, and capabilities of in-house talent make for different considerations when deciding what processes to outsource, for how long, and what conditions would dictate bringing them back in-house.

Blended operational models will be the norm for the foreseeable future. Four-fifths (80%) of the surveyed tax leaders agree their function is evolving toward a model which combines outsourcing, in-sourcing, and co-sourcing of tax operations, with the precise contours determined by the specific process and geographic location.

John McSorley, Head of International Tax and Transfer Pricing, Arxada

Tax leaders must also consider how to manage digital tax administration in their operational model. Over half of those in the survey (59%) plan to outsource it to some extent. This may involve adopting a global solution or a country-by-country one. It is worth noting, this is the only place in the survey results where there are significant regional differences within the survey group. While a majority in Europe and North America will outsource digital tax administration to one degree or another, most in Asia Pacific plan to manage it mainly in-house.

Ivo Nelissen, Head of Tax at DSM

About the research

This tax technology-focused research is the final study in the Tax Transformation Trends three-part series produced by Deloitte from 2021 to 2022. Deloitte’s findings are based on a November 2021 survey of 300+ senior tax and finance executives in a range of industries and geographies. We also drew insights from a series of interviews conducted with tax leaders at multinational companies including: Anglo American, Arxada, ASML, DSM, Enpro, ING, Macquarie, and Suncor.