Skip to main content

Tax outsourcing transformation planning

Mitigate tax transition risks and operate with dynamic control

With the rise of digital, many organisations are reexamining their tax operating model to find new efficiencies and reduce costs. Tax outsourcing or other operating model changes are well worth exploring—but understanding the transition risks first is crucial.


Phil Giuca, partner, Deloitte Tax LLP
Former Deloitte client

Several years ago, as head of tax for the asset management division of a large organization, I was faced with challenges that are familiar to most tax leaders. The operating model that had served our department well for many years was increasingly out of sync with more digitally enabled business operations, and our executive team was focussed on how our processes and technology could be made more scalable and sustainable. At the same time, perennial pressures to contain costs and operate more efficiently were compounded by growing expectations for our tax team to contribute more strategic value to our organisation.

Change was inevitable and continuing to operate the same way wasn’t a viable long-term option, but figuring out where to start was daunting, particularly considering the risks. While we were open to the idea of revisiting our tax operating model, we didn’t want to upset the apple cart with thousands of filings and many stakeholders at stake, including tax authorities, investors, clients, our business team partners, our C-suite and my tax team.

Our organisation opted to outsource much of our tax function to Deloitte, solving some of my most intractable long-term challenges (particularly leveraging technology and providing training and attractive career paths for my team), all while achieving significant cost savings. However, these benefits were dependent on first carefully identifying and then effectively mitigating transition risks. I’m pleased to report success: Those thousands of filings are still completed in a timely manner (many earlier than before), accurately and with the same high level of quality achieved under the previous operating model, and the tax function now has the bandwidth to contribute more substantively to business strategy.

My experiences leading a major tax outsourcing transformation as a Deloitte client and the experiences of my Deloitte colleagues can be instructive for tax organisations looking to understand transition risks and specific mitigation strategies.

Tax outsourcing and other operating model transformations: One size does not fit all


While COVID-19 has accelerated the trend, tax organisations of all sizes were already considering or actively engaged in adapting their existing operating models, according to Deloitte’s 2019 global tax management survey: 81 per cent of respondents were operating some type of centralised global tax delivery model, and 34 per cent were outsourcing to a third party. Tax organisations are adopting new operating models primarily to gain efficiencies and cost savings through digital automation and to shift the focus of tax professionals to a more strategic advisory role. Organisations today have many options for fulfiling tax responsibilities: Outsourcing full operations, co-sourcing or outsourcing specific tax services while keeping tax leaders within the organisation and a variety of insourcing models supplemented with consulting services, shared services and process automation.

Understanding the potential transition risks and mitigation strategies for these different options is a crucial first step in making staffing and process changes to achieve your organisation’s goals. The following are some key areas of focus and specific considerations for limiting types of transition risk. The steps and scale below will vary depending on various factors, including the size of your organisation, the number of people involved and the type of operating model selected.

Like any transition, tax outsourcing and other tax operating model transformations should have a clearly defined scope and understanding of the process and timing. Starting with current- and future-state process mapping, planning should be very granular at this stage to limit the risk of tasks falling through the cracks.

After meeting with all affected teams to document processes and responsibilities, you’ll want to categorise what people do on a day-to-day basis and create a comprehensive, itemised list of roles and responsibilities. It is also critical that your tax filing calendar and your tax policy and procedures manual are up-to-date, comprehensive and thoroughly documented. These tools will inform your decision process in determining what responsibilities could or should be met within your organisation and what tasks could be outsourced.

For roles you decide to outsource, you can mitigate the challenges of knowledge transfer by “rebadging” people—moving your team members to the service provider and preserving institutional knowledge and familiarity with systems and culture.

Once you select your future operating model, many service providers can also provide contract personnel or shadowing resources who can work within your organisation. These individuals can provide reinforcements during the transition period while gaining meaningful experience with your issues and systems that can be leveraged post-transaction. Similarly, running pilot or test calculations on higher-risk process areas can help mitigate risk at the time of actual delivery.

Once scope and timing are well established and documented, an effective project management office (PMO) is essential for conducting a smooth and successful transition with limited risk. The PMO can be part of your organisation’s team or an external resource, but they should be very familiar with your priorities and capable of helping identify, create and implement key transition workstreams. Talent, technology and technical tax analysis are common workstreams that will likely benefit from PMO oversight in the form of setting due dates, assigning responsibilities and scheduling check-ins to make sure tasks are on track, problems are identified and addressed early, and the overall transition is progressing as expected.

In particular, broader transformation (outsourcing tax operations completely to another provider, for example) may require co-ordination with peer teams at the service provider on a wide range of legal, independence, technology and HR-related transition issues. The PMO plays a critical role in ensuring effective collaboration between the respective teams: For example, HR teams are working with their counterparts to co-ordinate talent transfers, legal teams are jointly focusing on contracts, and facilities teams are co-ordinating physical moves.

In addition to frequent team meetings, a robust governance structure is crucial to mitigating transition risk by promoting effective communication, transparency and responsibility. The structure and meeting cadence of governance is especially important; committees should be staffed with increasingly senior levels of your personnel and that of the service provider who meet regularly to discuss a range of items, including issue escalation and resolution, scheduling and completion concerns, changes in engagement scope, access to technology and data flows and tax law changes. Governance will require (and help ensure) that the right people are engaged and informed and communication is fluid, from planning to go-live to smooth operations in the new model.

Investing in and reaping the rewards of an effective governance model may increase the trust between you and your service provider, a critical factor in a successful long-term engagement.

As part of the operating model transformation, your classic “build it or buy it” technology options include using the technology of your tax outsourcing service provider. When organisations move tax department staff to Deloitte, for example, they have immediate access to a tax technology platform with the power of automation, digital tools and analytics. This can reduce manual work, increase efficiencies and offer tax professionals the insights and time to think more strategically about their work. For many tax teams, this may be a more viable option than building out these digital capabilities and managing them in-house.


Outsourcing your tax technology platform mitigates significant risks, but you’ll want to ensure that certain safeguards are in place; for example:

  • Complete a deep dive at the outset to fully understand the existing technology pain points, as different industries, subledgers and business combinations all present unique challenges that need to be addressed.
  • Ensure that you still have the ability to manage data flows and maintain continuous access and availability of data, including data from functions outside of tax and any third parties you might work with.
  • Thoroughly analyse and document all cybersecurity and confidentiality risks between your IT department and the service provider’s team.
  • Discuss dashboard reporting functionality that provides you with a quick, easy view into your outsourced operations, including the status of returns, hours and flexible reporting options.

With all the elements of transition risk, successfully addressing talent is a critical mitigant in tax transition planning. The tax professionals with the technical and practical knowledge of and experience with your business and stakeholders will play a major role in determining the outcome of your transition. You’ll want to keep them together by ensuring they are motivated, well-trained and on a rewarding career path, regardless of whether they are rebadged or remain in-house. Our next article on talent and culture considerations focuses in more detail on these people aspects of tax operations transformation.

Did you find this useful?

Thanks for your feedback

If you would like to help improve further, please complete a 3-minute survey