Reskilling the tax department to relieve the anxiety of the largely unpredictable and uncontrollable tax regulation landscape
Bloomberg BNA’s recent survey of corporate tax departments pinpoints one primary internal challenge:
“A lack of alignment between [taxpayers’] accounting systems and their tax compliance or provision processes.”
Were we to turn back the clock one year, five years, or even 10 years, the apparent lack of alignment between accounting systems and tax processes would be a consistent issue. Why does this continue to be a challenge after so many years? We believe that the solution partially lies in curing the misalignment between the skills of the tax department and the increasingly data-intensive compliance or provisioning processes. We also encourage tax department leadership to scrutinize the reliance on technology-only solutions, which don’t appear to be solving the issue.
Remember: The data exists. The tax department staff might not know where it is or they might not know how to get it, but they can be taught.
Potential changes to tax laws topped the list when some 250 corporate tax professionals were asked to identify their greatest challenges and concerns, according to the Bloomberg BNA Survey of Corporate Tax Departments 2017.
Proposed U.S. tax reform, international tax compliance issues — mainly country-by-country reporting rules — and potential changes to transfer pricing rules, were major worries.
But the tax world is always expected to change. Tax departments not being able to handle these changes as second nature is analogous to a pilot being unable to fly a plane because the weather changes constantly.
The survey respondents identified one internal obstacle above all others: a lack of alignment between their accounting systems and their tax compliance or provision processes. Specifically, there is a disconnect between their tax department’s compliance-based needs and its tech-based realities.
The knee-jerk reaction to this dilemma is to hire more people or spend more money on technology. The more effective, cost-efficient, and long-term solution: reskill a portion of the tax department.
Reskilling and Reassessing New Hires
Consider a scenario all too common to many corporate tax departments. The tax professionals need to analyze financial data to discern whether the company will remain compliant with the domestic and global tax changes. Now begins the long process of determining whether the relevant data exists, who is the subject matter expert, and how fast can the data be retrieved.
The calls and emails go back and forth in search of the “master” data keeper. A request is submitted and the waiting game begins … until the data finally arrives as the deadline looms. But how is the data going to be validated? Or is it assumed to be correct? The tax professionals still face a time-consuming and costly task of manually analyzing the information.
Many corporations already possess technological tools that tax department staff do not know how to use or don’t know exist, such as database technology or other business intelligence software, to avoid manual processes. Rather than add new technology or hire more people, the company should consider reskilling tax professionals to handle the task of finding and gathering large volumes of disparate accounting data for their tax reporting needs. The goal should not be to invest solely in technology, but also to invest in people.
In addition to reskilling, companies can reassess their needs when the time comes to replace departing team members. In other words, refrain from replacing the previous employees with people with the same skills. This is an opportunity to hire individuals with new skills, particularly individuals who already possess the skills mentioned above.
The Bottom Line
While tax departments fret over the largely unpredictable and uncontrollable tax regulation landscape, we suggest alleviating some of that anxiety by reskilling resources that can respond to the growing and more data-intensive compliance needs.
If tax departments do not invest in reskilling or reassess hiring needs, then they will continue to face the same or even more challenges in the years ahead.