Deloitte’s Technology in Focus Report Uncovers How Leaders are Leveraging Tax Technology to Prepare for Greater Scrutiny from Regulators

NEW YORK, NY, US, 24 March 2022 — Deloitte today announced the launch of Technology in Focus, the third and final report in its Tax Transformation Trends series, which surveyed more than 300 tax and finance executives globally, examining how technology has ushered in an entirely new age of transparency for the tax function. The study shows business leaders are expecting these dynamics to intensify with the OECD’s Pillar 1 and 2 agreements, and revenue authorities’ accelerated shift toward digital tax administrations. In this survey, 70% of tax leaders predict that revenue authorities will have more direct access to their systems within three years.  

The study explores how tax leaders use technology to prepare for greater scrutiny and how they can best provide transparency by: 

1. Focusing on data quality, automating processes, and rethinking operating models.  
2. Leveraging the momentum of NextGen ERP and finance transformation projects to provide the means necessary to address data quality issues and ultimately allow for transparency.  
3. Using the OECD’s Pillar 1 and 2 and the move towards digital tax administration to create the business case for investment in the tax department. 

In addition to the survey, the report drew insights from a series of interviews conducted with tax leaders at companies including Anglo American, Arxada, ASML, DSM, Enpro, ING, Macquarie, and Suncor.

NextGen ERP: Data access for Tax transparency

Tax leaders leverage NextGen ERP projects as a gateway to both team with finance and to gain access to tax-sensitised data via revamped, standardised processes and integrated systems.  

• 86% of respondents are in the process of implementing a next-generation cloud-based ERP system such as S/4 HANA or Oracle Cloud.  
• Of those respondents, 24% have already implemented an upgraded system, and another 37% are close to going live. 

“Technology is creating risk but is also the most effective way to mitigate it”, says Andy Gwyther, Operate Leader, Deloitte Global, Tax & Legal. “The scope of access by tax teams to enterprise data will be a determining factor in just how durable their tax positions are—and thus how vulnerable the glass house they are operating within is. With tax authorities having direct access to companies’ IT systems, for example, tax teams will need complete confidence in the data the authorities will be viewing”. 

Confidence levels for ERP upgrades are high among the respondents, and particularly the first movers. Those firms already working in a NextGen ERP system see benefits that stretch beyond compliance and reporting.  

• 60% of this group describe their ability to conduct sophisticated scenario modelling as “very strong” —relating, for example, to the OECD Pillar 1 and 2 changes. This is almost three times as many as in companies that have not yet implemented a NextGen ERP.  

Pressure from the public and regulators

“Regulation has long been the change driver incenting businesses to invest in their tax departments,” says Philip Mills, Deloitte Global Tax & Legal Leader. “But it’s the rapid shift toward digital tax administration occurring globally that is also propelling tax transformation forward, with undeniable implications for tax technology, and we are helping our clients navigate through this swiftly and strategically”.  

Technology fuelling Tax transformation

As their 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.  
 
Many in the survey are trying to exert a more significant influence over their function’s technology destiny.  

• 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 

Transforming for a transparent world, at pace

Many tax leaders are concerned they will not be able to move fast enough to address spiralling data management complexity and shifting demands on talent. For help, some are turning to third party providers and outsourcing solutions. Blended operational models will be the norm for the foreseeable future. 

• 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.  
• 59% plan to outsource the management of digital tax administration to some extent. 

Confidence in the age of transparency

Once implemented, tax transformation will not only address the transparency imperative, but it will also provide the ability to access, understand, report, analyse, and draw insights from across the organisation. Therein lies a golden opportunity for tax leaders as they pursue the transformation of their function from a largely compliance-focussed role to one that adds greater strategic value to the business over the long-term.

About the Deloitte Tax Transformation Trends Survey

This tax technology-focussed research is the final of a three-part series Deloitte produced from 2021-2022, engaging tax and finance executives at companies to understand their strategies for tax operations, talent, and technology. For this report, Deloitte collectively surveyed more than 300 senior leaders—including more than 100 heads of tax and CFOs—at a range of companies across industries operating in five or more countries across Europe, North America, and the Asia-Pacific region, to understand their future vision for the tax function and how they plan to get there. Deloitte 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. To dive deeper into these findings, you can view the full report here.