As companies accelerate their digital transformation journeys, embark on new ways of working and identify new growth opportunities, tax functions need to move in-step with the rest of the business. As the regulatory environment evolves, and with growing focus on business partnering, the Tax functions in our organizations need a modern upgrade.

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This implies redrawing the boundaries of what the Tax function focuses on, and accelerating adoption of advanced technologies and lower cost restructuring models to meet compliance requirements and improve functional efficiencies. Per a Deloitte Global Survey conducted earlier, a cross section of Tax leaders feel their teams need resources and skills to offer deeper advisory support on digital business models (65%), supply chain restructuring (49%) and on sustainability (48%).

The Tax function is moving away from mere compliance and towards strategic partnership with the business, causing tax leaders to rethink the function on three key facets.

Reimagining Tax Operations

The obvious one is centralisation. Centralisation needn't mean a consolidation of all elements of the function in-house, but rather a balance between core functions and those that can be outsourced and co-sourced. Each business is different, and Tax leaders need to identify their own unique proposition for standardization, automation and centralisation, basis the needs of the business. Traditionally, Accounts Payable (AP), Accounts Receivable (AR), Order to Cash (O2C), Procure to Pay (P2P) are the first candidates for centralisation and outsourcing.

Transaction Taxes, Transfer Pricing and Payroll Taxes make great near-term candidates, followed by Tax Provisioning, Corporate Taxes, Litigation Support, Global Trade Management (including Customs classification and licensing requirements), Global Expat Services, Tax Documentation Digitization and Data Management, etc. This centralisation unlocks value by freeing up tax resources to contribute to critical areas like supply chain restructuring, M&A activities, ERPs, tax analytics, digital business models, etc

When evaluating the centralisation of the Tax function, the first area to focus on is country-specific tax laws and complexities. It is best to start with geographies that can be centralized without needing location specific SME support and then move on to more complex geographies. Existence of multiple systems/ platforms can pose significant challenges to the adoption of a new tax technology or process, or even the standardization and centralisation of one. Language issues must also be anticipated and navigated before roll out, as should talent shortages. As with anything else, a thorough Budget – Cost benefit analysis is key in designing a strong business case for such an investment. Starting out with a Proof of Concept (POC) can be a good strategy, prior to full scale centralisation.

Reimagining Talent – Work, Workforce, Workplace

Tax teams today need an entirely new set of skills - technology and business advisory are at the top of that list, as are process engineering, data science and literacy in other technologies. Hybrid and remote working models are also here to stay, which means that new approaches to talent recognition, career development, performance management and workflows are needed.

Tax leaders must evaluate these in advance, to mitigate the impact of these changes on their talent.

Reimagining Technology

Digitisation and standardization of tax records and processes, along with the ability to handle and manage vast amounts of data, are the key to tax transformation and centralisation. Processes around data management (integrity/quality of data, data reconciliation, data analytics) can aid the Tax function in increasing their contribution to business growth.

Strong ERP systems/ platforms can be significant multipliers, enabling digital filing, maintenance of comprehensive records, enhancing efficiency and improving data quality. Automation across systems, beyond the core ERP, as well as the use of Robotic Process Automation (RPA)/BOTs, and extractors can also lead to significant efficiency gains.

Conclusion:

Centralisation and automation of traditional and routine jobs like transaction processing, tax reporting and tax compliance are the first steps for transforming Tax functions. Adoption of next-gen tools and technologies, like predictive analytics, real time reporting, predictive tax planning, tax controversy and defense, as well as scenario modeling and profitability analysis will unlock much greater 'net new' value addition to the business.

Authors – Manisha Gupta, Partner, Deloitte India, and Prashanth Bhat, Partner, Deloitte India.