Tax departments of the future | KPMG | GLOBAL
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Tax departments of the future

Tax departments of the future

Tax departments of the future

Tax departments of the future

At the beginning of this report, we noted that an efficient and effective tax department is structured to ensure accountabilities are clear, that the right mix of dedicated and shared resources are available, and that processes and technologies are leveraged to improve consistency, quality and efficiency. Are today’s companies prepared to make the investments in people, processes and technology needed to create tax departments designed to meet the challenges of the future?

Survey results suggest that the trend toward greater centralization and standardization will continue. Increasing the number of tax staff members is tax leaders’ top priority for investment, and the number of tax department FTEs is expected to increase in half of respondent companies. With the notable exception of transfer pricing software, however, companies may be missing out on opportunities to drive increased efficiencies by increasing their use of tax-related software.

Tax departments of the future

Priorities for improvement

A strong majority of respondents say the trend concerning organization of tax departments is moving toward greater centralization.

Staffing and sourcing

Just over a third of respondents expect tax head counts to remain the same over the next 5 years, while over half of respondents expect their number of FTEs to increase — with almost one in five projecting their head counts will grow by more than 20 percent.

Forty-seven percent of respondents expect their use of cosource resources from tax providers to increase moderately over current usage. A similar proportion of respondents plan to increase their use of centers of excellence for key functions such as transfer pricing and transactions and/or finance shared service centers.

A minority of companies similarly expect to increase the use of virtual work environments to source their global tax departments remotely or their use of offshore resources to take advantage of wage arbitrage. Relatively few companies plan to decrease their use of any of these sourcing options.

Back office roles have always been challenged to do more with less, and tax is no different. Today, we see many tax departments working to automate repetitive processes and outsource standard compliance activities in order to focus more on the value-add aspects of the tax function. When done right, their tax professionals can concentrate on interpretation and analysis, decision making and strategy, leveraging their deepest skills and adding more value to the business. Sean Bloodwell, Head of Global Compliance Management Services, KPMG International

Companies may be missing out on opportunities to drive increased efficiencies by increasing their use of tax-related software. Compliance software is currently the most commonly used tax software. Twelve percent of companies that now use it plan to change their current software, while 20 percent of other companies plan to acquire compliance software in the next 5 years.

Off-the-shelf provision systems and document management systems are the next most commonly used software, employed by about one-quarter of respondents. However, there appears to be little enthusiasm to change tools or increase usage among current users. The majority of companies do not currently use tax software for tax audit support, global trade or workflow.

The one type of tax software that is expected to see significantly more use is country-by-country reporting software. Only 14 percent of companies use it now, and only a handful of these companies plan to invest in changing it. However, 38 percent of companies plan to acquire country-by-country reporting software in the next 5 years. In terms of satisfaction with their companies’ enterprise resource planning (ERP) systems in providing necessary tax data, a quarter of companies are ambivalent. Less than a quarter of respondents are satisfied with their current ERP systems.

In the next 5 years, technology changes to systems that supply tax data are expected to increase in the following areas (in ranked order):

  • overall leverage of enterprise finance IT systems for tax purposes
  • use of consolidation system data for tax purposes
  • understanding of tax data needs by IT resources
  • use of tax data warehouse
  • investment in tax-specific technologies
  • tax sensitization of business forecasting systems and tax sensitization of G/L and other accounts.

Tax authorities face the same issues that organizations do in terms of attracting and retaining the right skill sets and finding the right technologies they need to achieve their goals, but they are making real strides by building capacity through technological advancements and sharing of best practices across jurisdictions. The tax policy decisions seen over the past few years — the transparency requirements of the Foreign Account Tax Compliance Act and country-by-country reporting, the information-sharing requirements like Automatic Exchange of Information, and tax reforms around the globe — are largely fueled by what can now be accomplished by technology. Tax leaders need to leverage these capabilities in their own departments not only to keep pace but also to realize value. Tim Gillis, Global Head of Tax Technology & Innovation, KPMG International

Key takeaways:

  • The trend toward increasing centralization of tax departments will continue, and process
    standardization tops the list of tax leaders’ priorities for process improvements.
  • Over half of respondents expect their number of FTEs to increase — with almost one in five
    projecting their head counts will grow by more than 20 percent.
  • Compliance software is currently the most commonly used tax software, and one in five respondent
    companies that do not use it now intend to acquire it in the next 5 years.
  • A significant percentage of respondents plan to invest in country-by-country reporting software in
    the next 5 years.
  • Less than a quarter of tax leaders lack confidence in the ability of their companies’ systems to provide tax data.
  • Tax leaders’ top three priorities for new investment are additional personnel, tax technology and
    process optimization.
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