Survey: Sarbox 404 Burdens Tax Execs

Almost half of the respondents said the internal controls provision has made their departments more visible to their companies' boards.
Stephen TaubNovember 2, 2006

Senior corporate tax executives report a disconnect between the tasks they expect to spend time on and those they feel would deliver the most value to their companies, according to a new survey of tax departments.

Majorities of the 203 senior tax executives at U.S. companies responding to KPMG’s 2006 Tax Department Survey last June and July ranked accurate, timely financial reporting (63 percent) and tax return compliance (57 percent) as the two functions that their tax departments will spend the most time on during the next 12 months.

But when they were asked to rank tax functions based on their value to their companies, most rated cash tax savings/tax deferral (69 percent) and effective tax rate (64 percent) as the top two most valued functions.

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“Tax directors are finding that their roles have changed as a result of increased compliance-related activities,” said Brad Brown, a KPMG tax partner. “Tax directors are simply unable to spend the time they would like on non-compliance related functions that they believe are more important to their corporate leadership and more valuable to their organizations.”

As a result of regulatory demands—especially Section 404 of the Sarbanes-Oxley Act—tax directors have found themselves thrust into their companies’ spotlights after years spent under the radar. For instance, almost half of the survey respondents said the internal controls provision has made their departments more visible to the company’s board of directors, and 58 percent said that it has increased the departments more visible to the companies’ audit committee.

The survey also found that 80 percent of corporate tax departments are still dealing with an increased work load as a result of 404 compliance requirements. At the same time, 86 percent are dealing with increased documentation requirements and 81 percent must cope with increased independent auditor requirements.

What’s more, 89 percent of tax directors said increased tax accounting and 404 requirements are forcing them to spend less time on tax planning than they would like.