How can you get greater value from your Tax and Finance function?

  • Tax and Finance functions must grapple with scarce talent, legislative and regulatory changes, and the need to future-proof technology
  • Transformation moves tax from a compliance, business-as-usual function to a strategic partner 

The 2022 EY Tax and Finance Operations Survey (TFO survey) finds organizations balancing driving value, managing risk and reducing cost. COVID-19 has exacerbated pressures, while ESG is also rising up the agenda.

A vast majority (84 percent) of respondents are transforming their tax and finance operating models, prioritizing automation, shared service centers and co-sourcing. And 64 percent of tax functions have been involved in major finance and/or IT transformation initiatives (e.g., ERP).

At the same time, 87 percent of respondents plan to reduce the cost of the tax and finance function.

Investing in digitalization

Companies must achieve a balance between routine and strategic activities, which may call for investment in technology. For example, SAP has leveraged EY’s global network and technology investments to improve its own tax compliance capabilities.

Seventy percent of the survey respondents say they plan to invest $2m or more over the next three years.

An every intensifying war for talent

All business functions are struggling to attract and retain talent, and tax and finance are no exception. Since the pandemic, employees are demanding flexible working policies, calling for investment in remote technologies. Indeed, 54 percent of employees say they are likely to quit if they are not given the flexibility they seek.

People with specialized skills are especially scarce; 95 percent of respondents believe their tax and finance personnel must augment tax technical skills with data, process and technology skills. Consequently, businesses are turning to service providers for both technical and technology capabilities.

A heightened legislative and regulatory environment

Governments have a strong focus on fiscal stability and are expected to try and recover what was spent on the pandemic. Businesses also face more tax law enforcement activity, placing a further strain on resources.

The most notable development is global minimum tax of 15 percent, prompted by the OECD project. Corporate tax is set to rise in the UK, with similar proposals in the US.

According to the EY International Tax and Transfer Pricing Survey 2021, 76 percent of respondents admit to being challenged by the volume, pace and complexity of global tax reforms. The shift to digital filing and real-time or near-real-time reporting places a major burden on tax teams, pushing up the cost of compliance significantly.

Data and technology to the rescue

The C-suite recognizes the importance of technology, and appreciates that tax and finance functions can become valuable partners to the business. Thirty-seven percent of survey respondents believe a lack of a sustainable data and technology plan is the single biggest barrier to fulfilling their tax and finance vision.

On average, respondents expect to spend $4m in tax technology over the next three years. Given resource limitations, 56 percent say they have prioritized working with a provider with data, technology and shared services capabilities.

The road to transformation

  1. Re-think the operating model

By continually assessing the model, organizations can identify and address gaps in people and technology.

  1. Confirm core, in-house capabilities

Delivering activities in-house calls for internal transformation to get the most from existing people, data processes and technology.

  1. Establish when and where to co-source

Certain activities are well suited to co-sourcing, namely highly repeatable, data-driven and rules-based tasks – such as tax returns, regulatory filings and data collection.

  1. Think about going hybrid

A hybrid approach can improve effectiveness and efficiency, and also empower your people to become more of a partner to the business.