Corporate tax departments are facing an unprecedented barrage of new and changing reporting demands as a result of global regulatory shifts. To get a better understanding of the issues that corporate tax departments face, Thomson Reuters recently surveyed more than 3,500 tax professionals about their corporate tax challenges and technology. The survey results revealed a few key themes.
Compliance and Reporting
Forty-three percent of respondents cited compliance and reporting as their biggest corporate tax challenge. Tax departments are struggling to keep up with the growing reporting requirements as a result of new global regulations that require the collection, organization, and analysis of massive amounts of data from numerous systems.
Keeping Up With Regulations
According to the survey results, keeping up with new and evolving regulations is the single biggest challenge in compliance and reporting. Over the past year, companies faced major regulatory hurdles that require planning and preparation, often with incomplete or imprecise guidance.
- Affordable Care Act
The Affordable Care Act (ACA) created significant changes for employers, with new requirements for reporting 2015 health care coverage information to the IRS via Forms 1094 and 1095. The process requires unprecedented coordination and data collection between groups across their organizations.
At an October 2015 meeting with the heads of the G20 in Antalya, Turkey, the Organisation for Economic Cooperation and Development (OECD) finalized its base erosion and profit shifting (BEPS) action plan, aimed at putting an end to corporate tax avoidance. The BEPS initiative requires multinationals with global revenues of more than (approximately $838 million to implement country-by-country (CbC) reporting for tax years starting on or after January 1, 2016, (start dates could vary) and filing within twelve months of tax year end.
- Financial Reporting Standards
Businesses also faced changes and updates to financial reporting standards. For those groups adopting international financial reporting standards (IFRS), changes are coming for financial instruments and leases, impacting the local GAAP of many countries. Businesses need to ensure that financial statements are compliant with changing standards in the countries where they report.
The survey findings demonstrated that the greater the compliance and reporting complexities are, the bigger the data management issues become. Data management was the second-biggest corporate tax challenge cited by respondents, at twenty-seven percent. Data management challenges aren’t exclusively driven by external reporting factors. Twenty-eight percent of survey respondents reported that their biggest corporate challenges around data management are disparate systems and data sources. These responses reflect companies’ ongoing struggle to reconcile data from numerous enterprise resource planning (ERP) systems and incompatible systems, often exacerbated by mergers and acquisitions. This issue is clearly in focus for respondents, as fifty-four percent reported that an ERP implementation is underway or planned in their organizations.
Planning for Success
Skilled tax professionals continue to be the most important assets for any corporate tax department. According to the survey results, respondents valued technical tax skills as the most important attribute for a tax department, followed by proficiency in tax technology.
Not surprisingly, survey respondents reported that the value of having a skilled tax technologist on their team has increased over time, ranking the importance of hiring a tax professional with proficiency in tax technology as very important today (4.2 out of five), compared with fairly important five years ago (three out of five)—and they said it will be extremely important in the future (4.6 out of five).
Forward-looking technology can equip skilled tax professionals with the information and efficiency they need to comply with global tax obligations. The latest trends in comprehensive tax technology are focused on bonding tax data from disparate sources, keeping corporate tax departments up to date on relevant legislation, and enabling multinationals to stay ahead of inquiries from tax authorities. The power of globally linked tax data can provide corporate tax departments with contextually relevant legislative research, integrated work papers, and data analytics to help tax professionals make informed business decisions.
A total of 3,593 respondents completed the online survey between October 29 and November 5, 2015.
Irish McIntyre is vice president of product management for the corporate segment of the tax and accounting business of Thomson Reuters.