Owning the tax process: strategies for distributed teams

1) The foundation of effective tax process ownership

Effective oversight of tax processes hinges on good collaboration; the more seamless the better. With the high levels of distribution of tax responsibilities (over 98% of respondents in the Deloitte survey rely on either finance teams or shared service centers for some aspects of their tax operations), clearly delineated communication channels, well-defined roles and responsibilities, and robust accountability mechanisms become essential. This necessitates strong partnerships and transparent communication between tax, IT, and finance, extending to any external providers contributing to the processes.

Open communication with finance leadership and IT is particularly important, given IT's increasing influence over tax technology strategy and budgets (52%, according to the report). This communication helps technology investments align with the strategic objectives of the tax department and the wider organization.

2) Tax operating model trends

Deloitte’s recent report highlighted three key trends that are driving the design of effective tax operating models:

• Building a skilled and integrated team by bridging the skills gap;
• Leveraging data and technology, and using them as a catalyst for transformation; and
• Establishing strategic outsourcing partnerships.
   

2.1 Bridging the widening skills gap

Tax leaders must navigate a rapidly evolving landscape marked by increasing regulatory complexity and the growing need for advanced technological skills. The report highlights a significant skills gap within tax departments, with 45% of respondents identifying AI skills as their greatest need over the next two years, closely followed by 42% emphasizing data analytics and data-driven strategic insights.

Furthermore, the increasing complexity of tax regulations (cited by 40% as a top challenge) exacerbates this skills gap by demanding specialized knowledge and expertise in areas such as advanced technologies and data analysis techniques for compliance. In response to these challenges, leading tax functions are adopting a multi-pronged strategy to build integrated teams, equipped for both current and future needs:

• Comprehensive skills gap analysis – organizations are conducting thorough assessments of current capabilities against future requirements.
• Strategic internal collaboration – partnering with wider finance teams and other relevant functions not only helps address talent shortages cost-effectively but also promotes knowledge sharing, breaks down silos, and strengthens cross-functional relationships.
• Targeted recruitment and retention – companies are focused on attracting and retaining individuals who will lead technology and operations transformation for tax. This is reflected in the emergence of new roles such as tax transformation lead (added by 49% of respondents), data and innovation lead (46%), and tax operations lead (43%), underscoring the evolving demands of the tax function.
• Continuous upskilling and reskilling – recognizing the need for ongoing development, organizations are investing in training programs for existing team members in data management, technology, AI, and automation.

2.2 Technology as a catalyst for transformation

Advances in technology are a key driver for tax transformation. Specialized tax software, including automation and advanced data analytics tools, is enhancing accuracy, improving data analysis, and driving better decision making. Integrating tax-sensitized data and specific tax processes within ERP systems is also fundamental for enhancing efficiency and data visibility. However, managing multiple ERP systems can create further complexity, a common issue for many organizations, particularly those that have grown through acquisitions.

Addressing such integration challenges is essential for achieving the seamless data flow envisioned by initiatives such as the OECD’s Tax Administration 3.0, which promotes a more seamless, real-time, and data-driven future for tax administration. This increasing demand for real-time data and analytics requires tax departments to adapt their systems and processes by investing in solutions that enable real-time data capture, processing, and analysis, helping leaders stay ahead of the curve.

While the Deloitte report suggests a cautious approach to AI adoption in the near term, primarily due to concerns about accuracy and security (with more than 77% of respondents indicating a need for 90% accuracy before entrusting AI to lead their tax processes), organizations recognise the transformative potential of AI.

As AI technology matures and tax-specific tools become more sophisticated, AI will play an increasingly prominent role in areas such as tax forecasting, risk management, and strategic decision making. Therefore, exploring potential AI use cases now and developing a roadmap for future implementation is advisable. This measured approach allows tax teams to gain experience with AI, build confidence in its capabilities, and strategically explore initial use cases such as automating routine data entry and processing, paving the way for more sophisticated applications in the future.
 

2.3 Outsourcing: building strategic partnerships

Outsourcing continues to be a significant trend in tax, offering a range of advantages, including:

• Cost reduction (cited by 68% of respondents in the Deloitte report);
• Access to specialised expertise and talent (67%); and
• Increased flexibility and scalability (also 67%).

Organizations must carefully consider which benefits are most relevant to their challenges and strategic priorities when deciding on an outsourcing strategy. Choosing the right outsourcing provider is a significant decision and is regularly seen in terms of transformation partnering, as well as delivering compliance and reporting services.

A successful outsourcing partnership involves working with the provider as an extension of the integrated in-house tax team, with clear communication channels, well-defined service level agreements, and shared performance expectations. Scoping is often extended to upstream processes such as data extraction and categorization, as well as an expectation that the outsource provider uses insight from compliance data to drive strategic advice.

3) Moving from effective to world-class tax processes: practical next steps

Navigating this complex and evolving landscape requires a structured and informed approach. A practical starting point is developing a comprehensive framework for assessing your organization's specific needs, considering factors such as size, industry, risk appetite, and growth plans. This assessment should inform the design of the target state and creation of a detailed implementation roadmap, outlining clear timelines, resource allocation strategies, and key performance indicators.

To build a truly world-class tax function, tax leaders should prioritize the following key actions:

• Cultivate adaptability – embrace change and foster a culture of continuous improvement in strategies and processes to navigate the rapidly evolving tax landscape.
• Invest in leadership – identify appropriate tax transformation leadership to champion and oversee the implementation of new technologies and process improvements, as well as establishing robust end-to-end, ongoing ownership of tax processes.
• Secure strategic funding – partner with finance and IT to secure the necessary budget for technology projects essential to modernizing the tax function. This collaboration is crucial for aligning tax technology investments with broader financial strategies.

Learning from real-world examples of successful initiatives such as those highlighted in the Deloitte report, involving leading multinationals, can provide valuable insights. Supplementing this with research into other case studies and best practices relevant to your industry and organizational structure can further enrich your approach. By taking proactive, informed steps, tax leaders can build future-ready departments equipped to navigate the challenges and capitalize on the opportunities that lie ahead.