KPMG International research has shown that the most effective, highly valued tax departments are those that manage tax risk and compliance while identifying opportunities for adding value through core tax management skills and proactive collaboration with all parts of the business in advancing the overall objectives.
For many organizations, having a tax department structure that centralizes management and resources can help to achieve these ends. Centralization can help ensure accountabilities are clear, the right mix of dedicated and shared resources are available, and processes and technologies are leveraged to improve consistency, quality and efficiency.
Survey results show that many companies are moving towards greater centralization of tax resources and activities, especially in the area of transfer pricing. However, companies may have opportunities to further centralize accountabilities and activities — for example, through greater use of shared service centers or other centralized sourcing models.
Globally, the majority of tax functions still fall within the finance function, although 31 percent are independent. Over three-quarters of tax leaders report to the CFO or head offinance (other than CFO), while almost one in 10 report to the CEO directly.
On average, tax functions of respondent organizations have 17 full-time employees (FTE) at their tax department headquarters location, and an average of 19 FTEs at other locations.
Almost three quarters of tax departments are responsible for domestic reporting, while 60 percent have responsibility for global reporting. For the majority of respondents, the tax department has primary responsibility for:
A majority of tax departments do not use a shared servicecenter (SSC) to handle any of their activities. Of those that do, most have increased their SSC utilization, while only a fewhave decreased it. The processes most commonly delegated to SSCs are accountancy/general ledger, sub-ledgers (creditors, debtors, capital assets), and fiscal declaration processes (e.g. for VAT purposes).
There is no one-size-fits-all in terms of resourcing. Each organization is different. But what we are seeing more and more, is that tax departments are building out their own IT capabilities, whether by equipping tax professionals with technology skills or by teaching technology professionals tax knowledge. Departments may benefit from a combination of both these approaches. Scott Weisbecker, Global Head of Tax Transformation, KPMG International
Due to increased tax authority interest and activity in recent years, transfer pricing risk has been rising. This area is expected to put even more demands on tax teams in the coming years as countries implement the transfer pricing recommendations arising from the Organisation for Economic Co-operation and Development’s (OECD) Action Plan on Base Erosion and Profit Shifting (BEPS). Centralizing transfer pricing activities may facilitate more effective, efficient and consistent compliance globally as country-by-country reporting, master file/local file documentation requirements, and automatic exchange of tax information among tax authorities come into force.
In this light, it is encouraging to see that the transfer pricing functions of most respondents surveyed are either entirely or generally centralized in the headquarters country. Only 12 percent of transfer pricing functions are local or regional.
Additionally, most central tax departments are responsible for transfer pricing documentation for associated domestic entities, and just over half of them are responsible for associated foreign entities. Further, as discussed later in this report, a significant number of companies plan to invest in country-by-country tax reporting software in the next 5 years.