As TEI members know all too well, when it comes to tax data, we may be at a tipping point. To find out more about where we’re really at when it comes to tax data, Michael Levin-Epstein, senior editor of Tax Executive, interviewed one of the most knowledgeable tax professionals in the field, Amit Ringshia, principal in KPMG Tax’s ignition practice.
Michael Levin-Epstein: There are a lot of people in the tax field who think we may have an identity crisis when it comes to tax data. Can you comment on how tax is evolving in this tech and data-driven environment?
Amit Ringshia: The tax profession has found itself at a crossroads, as it pivots from being viewed as solely a compliance function to being a true value-driver for the business.
In the recently launched “KPMG Tax Reimagined 2023: Perspectives From the C-suite” report, fifty-nine percent say their tax department is not yet viewed as a value creator for the overall business because it’s too focused on a rearview mirror approach.
But the good news is that C-suite leaders are seeking out the technology tools to future-proof their tax departments and, as such, change the reputation of the profession as we know it.
According to the report, leaders overwhelmingly recognize AI’s [artificial intelligence’s] potential to transform their organizations with more than half (fifty-nine percent) saying they are already using emerging AI technology in their tax or finance department to make workflows more efficient and to reduce the strain on talent. Furthermore, 100 percent of leaders agree that leveraging data from across their organizations will help tax departments see around corners and influence smarter business decisions.
If data can be harnessed accurately and effectively, tax truly has the potential to become a strategic powerhouse and predict the business’ next best move to stay competitive. And with AI deemed the next frontier for tax, the technology may prove to be the secret sauce that helps them get there faster.
Levin-Epstein: Let me follow up on that. What are your thoughts about the investment that companies are making in new technology when it comes to data? I would imagine that there’s kind of a push-pull in terms of balancing the short-term needs versus the medium- and long-term needs. Your thoughts?
Ringshia: Companies know they must make investments in data and automation, as well as in the talents who possess both the skills to run the technology and make sense of the data—including those with tax technical aptitudes. Finding this right mix of talent, however, is a persistent problem for many tax departments.
Too often, leaders want to remedy skills gaps and other technology pain points quickly. But this focus on short-termism can be detrimental to the ambition to modernize your tax department. Overlooking the long view will only lead to higher technology and process deficits, and slow you down.
This is perhaps why we see an increased appetite for various sourcing options. Nearly all executives (ninety-nine percent) say they would consider an alternative sourcing model to leverage the technology expertise, tools, and skills of a third-party provider. C-suite leaders will need to continue to consider how they can best respond to changing market forces and the evolving business landscape—and quickly—so they don’t risk getting left behind.
Levin-Epstein: What are the keys to this transition to make it successful from the short-term approach of dealing with what happens every day to the long-term approach of investing in data as a whole? What are they keys to success?
Ringshia: While companies will always need the flexibility to address the day-to-day challenges, it is important they establish guiding principles in the form of a data strategy, so they don’t end up with fragmentation problems.
Having a data strategy in place will make it easier for companies to navigate certain problems in a singular way. Guiding principles ultimately improve a team’s decision-making capability and speed up their ability to address the business need, serving as a force multiplier. Further, a data strategy enables projects to get organizationally oriented—so it becomes less about a single person or team and more about the organization, working in unison with a clear vision.
Levin-Epstein: What are some elements of a good tax data strategy?
Ringshia: A tax data strategy starts with understanding the vision, objectives, and goals for the business at large. In short—a good tax data strategy is good for the entire business. Critical elements include:
- identification of the value-drivers of the tax department as a way to ensure high value opportunities are brought to fruition;
- engagement and alignment with various stakeholders within tax and the larger organization, including the finance and IT departments;
- consideration of the ecosystem of the value-generating areas, such as common data models, storage, collaboration, and analytics tools. These elements need to be considered in tandem with the needs of the tax team, to ensure that they will effectively operate in the future state; and
- an implementation timeline, because, as with any future state roadmap, to bring the strategy to life there needs to be a plan. Delivering continual business value within each milestone is key.
Levin-Epstein: I think TEI members are wondering, and we’ve touched on it in other interviews, what are your thoughts as far as strategy is concerned in this space?
Ringshia: Tax has seen unprecedented disruption over the past few years. Items like BEPS 2.0, tax transparency, digital services taxes, ESG [environmental, social, and governance investing], and direct data reporting and government-controlled invoicing have all found themselves rising in importance on the C-suite agenda. These regulations require a globally consistent reporting framework rooted in data and that ties back to financial reporting and tax compliance and filings. Consistency in transfer pricing documentation and audit compliance also require a consistent data-centric approach.
Today, technologies such as cloud infrastructure are readily available and can effectively and affordably be used to meet the increased pressures companies face.
With the proliferation of AI, the tax profession finds itself at a pivotal moment. It is important for organizations to rethink their data management practices in the age of AI. It is near impossible to build good AI or decision support systems when data is scarce.
Simply put, to set a sound data strategy that supports real-time data sharing and true value generation, data needs to be readily available to the tax professional. This availability will ensure that the business can respond with appropriate speed in a fast-paced, ever-changing tax landscape.
The time to bet big on emerging technology—including generative AI—to future-proof your tax department is now.