Businesses and regulators are demanding quicker and more streamlined tax reporting. Tax compliance is becoming more complex, especially for global organizations. The tax function is being called on to provide upper management with data-driven insights that inform broad, strategic business decisions. The regulatory environment has gained unprecedented attention by the mainstream media.
In light of these forces, the role of the CTO, and other tax leaders, is evolving significantly.
In this edition of Chief Tax Officer Outlook, we examine the changing expectations on, and responsibilities of, the CTO and other tax leaders in today’s high-stakes tax environment, including how they add value to the business, prepare the business for potential legislative changes and size and staff the tax function in light of the current economic environment.
Tax has shifted away from solely a back-office function. As organizations recognize that more data and more insights are critical to achieving a competitive advantage, the role of the CTO has changed. CTOs and other tax leaders now have a seat at the leadership table and are increasingly involved in significant organizational decisions. After all, tax and finance have a pulse on key performance indicators that can help business leaders see around the corner, avoid surprises and prepare strategically for what’s ahead.
One way CTOs and other tax leaders are adding strategic value to the business is through modeling activities. Whether the business is anticipating a new regulation, a geographic expansion or a merger or acquisition, tax modeling can help leadership prepare for any kind of outcome.
Another way is by integrating with the broader leadership team. Although it takes time to earn the trust of leadership and understand the business well enough to provide insights that make an impact, the CTOs and other tax leaders we work with say they are making headway. Many are making a point to meet with senior management to demonstrate that they are not ‘just tax people’. They often focus conversations on educating leaders on the business impact of current, top-of-mind tax issues, remind them of how tax is helping to grow the business or add value in other ways, such as through tax savings.
CTOs and other tax leaders say it is very important to find effective ways to communicate what business leaders need to hear. That might mean presenting on specific, timely topics — such as US tax reform — directly to the CEO and COO rather than solely financial management, as has historically been the case.
With many organizations exercising caution in spending given a new administration in the White House and an uncertain global economic outlook, many tax functions are facing budget cuts. Yet as downsizing occurs, tax is also expected to do more. As a result, CTOs and other tax leaders are challenged to rethink how tax performs its duties and garner support for the department among leadership.
To cope with shifting department sizes coupled with increased expectations for performance, many CTOs and other tax leaders are turning to intelligent automation technologies. Technology has long been prevalent in the tax departments, but today’s digital labor tools are much more powerful than the software and systems of even the recent past. They enable CTOs and other tax leaders to bring together masses of data for faster, deeper analyses of tax positions while also streamlining basic and routine tax processes, thereby eliminating the need for some staff roles and enabling tax professionals.
Given the vast complexities involved in automation projects, it is no surprise that many fail to achieve expected results. However, a clear strategy, combined with careful alignment of skills, support tax technology automation success.
— How do you measure results and clearly articulate the value the tax department brings to the organization?
— Which aspect of current tax reform proposals (e.g., rate structure, denial of net interest expense deduction, expensing) would have the greatest impact on your company?
— Are you considering intelligent automation technologies to cope with shifting department sizes and increased expectations?