Audits, compliance, and data management are crucial operations, but tax professionals have the potential to bring even greater benefits to their organisations. By forging a closer working relationship with finance, IT, operations, sales, and other areas, tax functions can embed themselves as a strategic partner within their organisation, aligning with and advancing business objectives.
Rather than viewing the department primarily as a compliance operation, companies can leverage an optimised tax function, as well as the extensive skill set of their tax staff, to help improve financial decision-making and, ultimately, boost the firm’s bottom line. But how can this be done in practice?
Clarify the tax department’s vision
New technologies are transforming tax functions’ potential. Now is the time to assess where the department stands and how it can be optimised. The key questions are: what is the current status of the function? What are the opportunities for transformation for the function internally and the organisation as a whole?
When it comes to answering these questions, tax leaders should consider performing a SWOT analysis to get to the heart of the state and potential of their function, along with its place in the organisation. Reviewing external and internal factors that affect the department requires input from stakeholders with diverse perspectives. This range of experience and expertise will help challenge assumptions and uncover hidden risks and prospects.
The right strategy, compellingly presented to leadership, is an integral first step in elevating the department’s status and the scope of its role in the organisation. As with any strategy, this needs to be aligned with a full understanding of the company’s realities and goals to prioritise achievable opportunities. Once the tax function has determined its vision and secured buy-in from senior management, it will need strategies on how to best achieve it. The solutions are likely to be based on pillars of technology, systems, processes, and talent.
Develop the department as a strategic business resource
With a clear, bold, achievable vision established, tax executives must show the energy and ambition to integrate and bring value beyond their department. Tax authorities are already requiring increasing levels of data transparency and accuracy, and, at the same time, businesses are waking up to the benefits of high-quality, real-time data. This is an opportunity to be seized—today’s tax functions are uniquely placed to position themselves as central stakeholders in digital transformation. Particularly, in companies that have been slow to adopt a digital or data-first culture, the tax department should have the motivation and ability to be a driver of change.
Beyond transformation, the C-suite is increasingly concerned with risk and risk management, particularly in today’s challenging economic environment. By being at the vanguard of establishing the organisation’s data structure, the tax function is in a strong position to scrutinise operational and transactional data, identify risks and opportunities, and become a strategic asset in the process.
The tax function’s position as a data hub means that by prioritising the auditing of transactional data on a regular basis, it can develop forecasts for different departments to help them stay within budgets and maximise profits and/or cost savings. By bringing tax considerations to other functions, especially through workshops that help them understand the tax implications of their operations, tax can become an increasingly dependable and depended-on internal business partner.
Forge a relationship with key stakeholders in other departments, such as IT and finance
Transformation is not an event but a continuous process. In the same way, working with key stakeholders in other teams is both an important initial step to invigorate the tax function and an essential part of continuing the transformation journey.
While technical tax knowledge and skills remain integral to a successful tax function, a department aiming to become a strategic partner within its organisation should invest in expanding its in-depth knowledge of business-wide operations. Doing this can facilitate mutually beneficial collaboration and problem-solving capacity and reduce the chance of friction at a time of change.
As tax is naturally closely linked with the finance function, finance is an important place for tax to start forming relationships and aligning strategies. Doing so will also assist with decision-making around accessing additional funding. Operations and IT are also essential partners for ambitious tax professionals who need the right systems and processes in place if they are to succeed in elevating their department.
Make yourself aware of changes in global tax regulations
Global tax regulations are constantly changing, with one of the most recent significant changes being an international agreement to set a minimum effective level of corporation tax at 15% for large multinational enterprises in 2023, according to the Organisation for Economic Co-operation and Development (OECD). This is being implemented under a “two-pillar system” that will have important implications for tax incentives around the world, according to the OECD’s Tax Incentives and the Minimum Global Tax report.
Such regulatory changes need to be monitored and applied where appropriate to the business, but it is also the responsibility of the tax function to identify ways in which these rules can benefit the company. For example, there may be new R&D tax breaks announced.
Providing the C-suite team with regular updates on all these elements will make the tax department an indispensable partner of the business.
Leverage your transactional data to find gaps
The tax department is the one area that sees every transaction that goes through the books, thanks to the nature of invoicing or the raising of purchase orders to buy, for example, raw materials. Analysing this data will help highlight inefficient spending within the business and allow this information to be passed to the leadership team along with proposals on how to reduce or eliminate any spending waste.
By undertaking a complete tax management review across the business as a whole, the company can be clear about its tax exposure and ensure its systems and processes are reporting tax accurately.
This type of review also provides the chance to identify any missed opportunities to recover overpaid tax and maximise the benefits of any rebates or grants that may be available to specific areas of the business that have not previously been identified. This is essential to help the business improve cash flow and profitability.
It’s time for tax professionals to take stock of where they are and where they want to be. New digital systems are bringing opportunities to add new dynamics to the function beyond compliance and reporting alone. By taking the steps above, the tax function of any company can evolve into an important strategic partner with a seat at the leadership table.
Explore how Ryan can play a role enhancing unexpected facets of your tax function.
Interested in exploring how the tax function can positively impact the business as a whole? Read Knowledge is Power: How Transparent Tax Systems Fuel a Thriving Organisation.
Principal, Client Services