From the global push for a corporate minimum tax to a dizzying array of acquisitions to macro-changes related to politics and the economy, tax departments are feeling the heat, and it comes at a time when bandwidth is already stretched to the limit.
Thomson Reuters’ 2021 State of the Corporate Tax Department Report found that half of corporate tax departments say they are under-resourced. Digitized tax filing, remote work, and new technology and automation projects have further added to the strain, making the dynamics in these departments seem untenable.
That last part may sound troubling to the armies of software and business process automation providers who’ve been pitching tech as the magic elixir to solve these problems. However, as we see consistently in real-world corporate tax departments, just because a piece of technology can automate a task in a vacuum doesn’t mean companies are ready to implement it. Much like building a skyscraper on a bed of sand, trying to install a sweeping technology upgrade in a corporate tax department that hasn’t yet laid a sturdy foundation for it makes many of these projects doomed from the start.
And therein lies a lesson. Companies have learned over the better part of the last two years that it’s not enough to have lots of technology available; that tech needs to be synchronized and streamlined to deliver across a wide variety of use cases. Simply buying point solutions and layering them on top of one another without any strategic planning around how the moving parts will work together can often create even more work.
Perhaps that’s why more than half of the corporate tax pros we polled described the current state of their tax departments as “chaotic” (21%) or “reactive” (32%).
The fact is, many tax departments faced considerable challenges during the COVID-19 crisis because their enterprise resource planning systems, tax systems, and financial portals were designed to support vertical functions and specific purposes. Unfortunately, in the decentralized world of company-wide work-from-home operations, many of those systems were either inaccessible, not compatible, or just not functional in time – leaving teams to make do with Excel spreadsheets, approximations, and gut feel.
More often than not, even companies with some level of tech sophistication found themselves cutting and pasting content from legacy systems, digging up files stored on individual PCs, and spending way too much time on clunky, inefficient workflows.
If corporate tax departments want to get the most out of their tech investments, they need software and a data infrastructure flexible enough to address the evolving needs of a distributed workforce and a constantly changing rulebook.
For many, that will mean getting a lot more serious about data. Companies need to track granular, localized inputs and trends to inform strategic decision-making and anticipate necessary directional shifts early on. Enterprise-wide data and analytics capabilities are no longer a nice-to-have. The growing strain on corporate tax departments has made it clear that real-time insights are central to not just avoiding costly mistakes but uncovering ways to forecast what’s to come.
For others, the focus will be centered on compliance, implementing the tools necessary to automate the most labor-intensive components of tax collection and reporting. Those include calculating ever-changing state, county, and local indirect tax rates at the point-of-sale and automatically reporting that information upstream.
In all cases, as tax departments continue to confront stricter compliance requirements, bigger workloads, and splintered staffs, it is essential that they approach new tech less like a transaction and more as an opportunity to transform workflows and future-proof themselves against the next crisis.
Simply acquiring technology for the sake of technology will no longer fly. Both the buyers and sellers of corporate tax software need to recognize that we’ve now entered a world in which everything is intertwined. The back-to-school sales tax holiday in Texas, the new digital services tax being implemented in Great Britain, the intangible income from Switzerland, the payroll tax on a remote worker for a New York company living in Florida – they are all connected, and the corporate tax department needs to be able to account for all of them. In real-time.
Brian Peccarelli is co-chief operating officer of Thomson Reuters.