Businesses have made great strides in digitizing tax, but still need to make efforts to embed innovative technologies and build stakeholder trust.
DThe excellent work of the connected tax sector, which can serve as a trusted business advisor, is still ongoing. This point is often driven home in meetings with clients, where it becomes clear that they experience a disconnect between increased reporting expectations and insight into data. In a recent EY survey, nearly three-quarters of surveyed professionals said their tax authorities had increased digital requirements over the past three years. But four-fifths of respondents said they did not know what kind of analysis was being conducted on the collected tax data.
This single disconnection is one of many. Modern tax departments need to be connected to more constituencies than ever before – with deeper, more immediate connections. Internal teams run the gamut from the board, C-suite and IT department to the front lines of business, all of whom increasingly rely on the line function to make strategic decisions with confidence. External stakeholders include investors, tax authorities and, more recently, the public in a social media environment where a contested tax profile can tarnish a company’s brand. Building trust has become – sooner rather than later – critical.
Of course, the tax department has progressed since the days when it was a back-office working with historical data. We’re getting there, but the status quo is stable.
Diplomats and visionaries
Over the years, tax administrators have taken on new roles and responsibilities. They are stepping up as tax ambassadors who educate the C-suite and other stakeholders about the impacts of changing tax laws. They increasingly act as tax diplomats, cultivating relationships across their organization. As tax technologists, they embrace the power of technology to make their jobs more efficient and redefine their roles. As a tax visionary, they provide their organization with trusted business advice that helps leaders make educated decisions and find value.
However, while evolving in all these roles, the tax industry has yet to transition to a „new normal”. Unprecedented new tax policies and game-changing technologies provide continuous disruption, repeatedly challenging the way taxpayers work and the models they use.
Consider that US tax law changes, once considered highly unlikely, have now become something akin to a megatrend in terms of their immediate impact on US tax departments. EY Group estimates that the amount of effort required to deal with compliance with the new legislation, in addition to the requirements of the EU’s mandatory disclosure regime, will at least double over the next year. There may be business implications for U.S. companies based on how they operate, invest, compete, and provide products and services — both in the U.S. and abroad.
Another legislative turn may be just ahead, under the European Commission’s March 2018 proposal to tax digital business activities. Imagine the global implications if it were suggested that profits should be recorded and taxed wherever businesses interact with customers through digital channels.
