The idea that every problem contains the seed of its own solution has become such a universal business cliché that few people stop to think why this idea rings so appealingly true.
The reason is survival. When presented with a problem, human beings are hardwired to come up with a solution, because if they don’t, they might die. It’s as simple as that. Our species has learned, through painful trial and error, that unsolved problems can be extremely dangerous.
As 2021 approaches, there appear to be many brewing threats—problems in desperate need of a solution. But instead of dwelling on the dangers ahead, tax professionals may find it useful to start looking for silver linings of opportunity in the storm clouds of uncertainty on the horizon.
Here are a few ideas to get you started.
Threat: No matter how clear your crystal ball is, the economic outlook for 2021 is anyone’s guess. No one really knows what will happen, and the people who say they do are kidding themselves.
Opportunity: Because the future is so fluid, there is ample opportunity in 2021 for tax departments to step up and provide C-level execs with the kind of forward-looking analyses they need more than ever right now. Scenario planning, predictive modeling, and advanced analytics can provide some measure of assurance that whatever happens in 2021, the organization is prepared.
Threat: A lingering recession/depression persists well into 2021 and may stretch many businesses to the breaking point.
Opportunity: Now is the time to prove how effective tax strategies can mitigate risk and insulate an organization from systemic shocks. If it isn’t already, the business’ tax strategy should be coordinated with its overall business strategy—an alignment that allows tax departments to fully support and inform tactical decision-making.
Threat: Repeated waves of infection and lack of an effective vaccine keep everyone working from home in perpetuity.
Opportunity: The single most important quality all companies that want to survive 2021 will need is organizational resilience. That means developing ways to work and communicate that not only get the job done, but also maintain the organization’s culture through a strong sense of community and teamwork. No matter what happens in 2021, companies that take these steps will emerge from the coronavirus crisis with a workforce better prepared to meet future challenges.
Threat: Heretofore unprecedented tax complications arise from a cratering economy, massive unemployment, liquidity problems, and bankruptcies galore.
Opportunity: Even in this admittedly grim scenario, ample opportunities would exist for tax professionals to help companies come to terms with their circumstances. Furthermore, during periods of chaos and confusion, it is especially important for the tax function to operate smoothly, which allows cooler heads to prevail when the heat starts to build.
Threat: Numerous tax provisions enacted in response to the COVID-19 pandemic were assigned a deadline of December 31, 2020, under the assumption that the pandemic would be under control by then. But because the pandemic will likely continue well into 2021, some of these provisions will likely be extended, and some will not.
Opportunity: Because tax policy in general is so fluid at the moment, and the burden of keeping up is so onerous, now may be the time to invest in software and machine-learning tools that automatically keep track of changes in tax policy and integrate those changes into their workflow dashboards.
Threat: You are in charge, and your department is swamped with an overwhelming amount of work, much of it coming from calls for “change” from above.
Opportunity: There is no doubt that change can be disruptive. But managing change—that is, guiding an organization through necessary transitions and transformations—is a professional discipline that can be learned and developed. To develop this key skill set, consider taking some extra training in the fine art of managing continuous demands to evolve and adapt.
Threat: Governments all over the world are rejiggering their tax policies in response to the coronavirus pandemic, creating a tsunami of policy changes—and these changes themselves can often morph at a moment’s notice.
Opportunity: For multinationals, keeping up with VAT rate cuts alone can make one’s head spin, to say nothing of cross-border arrangements, BEAT, GILTI, and other international tax requirements. Again, technology that tracks global tax regulations—so that you don’t have to—is a boon in these uncertain times, especially when dealing with jurisdictions that are unstable or struggling to find an acceptable tax solution to problems not of their own making.
Threat: As a result of COVID-19, your company’s profits are tanking, and the only way to fund operations through the end of the year is to borrow money—lots of it.
Opportunity: Tax’s bread and butter is saving companies money, so any planning scenario that involves borrowing also provides an opportunity for the tax department to shine—by maximizing whatever tax benefits are available and minimizing the downstream risks of borrowing (and repaying) to stay in business.
Threat: You’ve been working at home for months, with no end in sight, and the grind is wearing you down. You used to see colleagues at the office and go to conferences in sunny places. Now, you don’t see anyone in person except your immediate family, and talking tax just isn’t their thing.
Opportunity: Though the social part of office life has certainly been disrupted, the good news is that no one is alone in this, and there are dozens of places online where professionals can go to talk shop with their peers. LinkedIn and Facebook both have dozens of groups dedicated to tax experts, and almost every professional tax association—including TEI—hosts online gatherings for members who want to stay connected.
Threat: Following the 2020 election in November, the United States may or may not be under different leadership. Either way, there will be tax consequences.
Opportunity: Planning simultaneously for two or more decidedly different outcomes isn’t easy, but it is necessary if you want to be ahead of the curve going into 2021. If anything, the current political situation provides a golden opportunity to strengthen the tax function’s leadership position within the organization—by having answers ready when senior executives want to know what the impact of a new administration might be.
These are just a few suggestions, but you get the idea. Start seeing problems, uncertainties, and threats as windows of opportunity that allow you to respond with innovation, creativity, and intelligence. “Necessity is the mother of invention” is another time-honored cliché that applies here—because innovation, in business, is often the key to survival.
Tad Simons is thought leadership content developer at Thomson Reuters Legal Executive Institute.