Tax, Tech, and Talent

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Digital transformation of the corporate tax department promises significant return on investment—cost reduction, risk mitigation, and data-driven insights that grow revenue and profitability.

In our 2020 Corporate Tax Departments Survey, Acritas, a Thomson Reuters company, and the Thomson Reuters Institute interviewed leaders of tax departments at twenty-three large US-based companies and surveyed a broader population of more than 300 corporate tax professionals to unearth insights into departmental objectives, challenges, resources, talent, and the use of technology and external advisors. This new survey confirms that technology can be a game changer. In-house tax departments that responded to the survey reported spending an average of ten percent of their budgets on technology. However, departments that allocate more than ten percent to technology spend less overall relative to revenue. This finding strongly suggests that technology creates greater efficiency and lowers overall costs.

The tech transition, however, falls short at many companies. Our findings reveal several key challenges:

  • Fifty-four percent of corporate tax professionals said their teams lack adequate resources to do their jobs effectively.
  • When asked to describe the state of their tax department and their ability to leverage technology, more than half the respondents chose the descriptors “reactive” or “chaotic.”
  • Nearly forty percent of corporate tax departments lack specific tax-related skills, and thirty percent lack essential technological skills. Many respondents said they underutilize tax technology because their teams lack the skills, training, support, or time to use it effectively.

Respondents paint a picture of in-house departments striving to reduce international tax liability, provide more business-centric advice, reduce costs, ensure data accuracy, and integrate existing technology.

They described implementing tax technology as both their top strategy to optimize performance and one of their top two challenges. (Managing regulatory change is the other.) As noted above, the difficulty in fully leveraging tax technology is linked to a skills gap in many tax departments.

Asking team members to adopt new practices they are ill equipped to carry out can create an unhealthy, threatening work environment. Some tax department leaders said their teams fear that automation will lead to job cuts, are skeptical of its value, and often resist the use of new technologies and revert to familiar manual processes.

So, how can in-house departments empower their teams and fully utilize their technology to improve performance and job satisfaction? Here are five ideas.

Communicate a Vision

People are more likely to board the train when they know where it’s going. Discuss your department’s current and desired states based on the definitions used for our survey:

  • Chaotic (28 percent of in-house tax departments). These departments use email, spreadsheets, system reports, and manual processes to collect, review, and prepare compliance and respond to audits. There is no integration across departments;
  • Reactive (33 percent). These departments use tax department databases and some third-party software with some automated feeds, but are not connected to enterprise data or departments across the company;
  • Proactive (28 percent). These departments are integrated with enterprise data and leverage tax automation software for file-ready compliance and storage of documents and data. Formalized coordination and processes are aligned with other departments;
  • Optimized (4 percent). Analytics-driven decision-making and reporting are available as needed, and tax workflows are completely automated across the enterprise; or
  • Predictive (6 percent). These departments leverage rule-based technology and embedded enterprise data for automated workflows, alerts, pre-audit analysis, and reporting across the enterprise. They proactively manage risk and regularly advise key decision makers with analysis.

To communicate a vision, describe to the team the journey from where you are now to where you’re going, including the problems to be solved, the steps to be taken, who the stakeholders are, and what the timetable and benefits will be. Discuss how staffers will be supported and trained to take on more substantive roles.

Include Team Members in Strategic Planning

People are more likely to embrace a future they help to create. Involve the tax team in identifying and prioritizing departmental needs, evaluating tech solutions and vendors, and determining how to phase in new technologies.

Promise That No One Will Be Replaced by Automation

People are more likely to stick around if they don’t feel threatened. One tax executive interviewed for the study put it this way: “Once they hear robotics, my team freaks out. They panic, start looking for another job, then go ahead and jump ship. They’re very quick to panic, react, and just find something else.”

This scenario is certainly less than ideal. If headcount reductions are part of the business case for adopting technology, then commit to achieving them through attrition and voluntary reassignment, not through layoffs.

Embrace the Tax Technologist

“At the heart of the people issue is whether a department has the right people,” the survey report notes. “Sometimes it’s simply a question of leadership—getting people to change their attitudes and be willing to adapt—but other times it’s a question of skills. You either need to train existing staff or bring in staff with a new [skill set]. And that leads to the question of whether to create a role for a tax technologist.”

A tax technologist is a professional who combines corporate tax expertise with necessary tech skills. To fulfill this role, either tax experts learn technology or techies are trained in tax and accounting. “There are convincing arguments for both sides,” the report says, “but overall, the majority believe it is easier to teach technology and analytical skills to tax professionals rather than the other way around.”

Be Patient

Survey respondents said the COVID-19 pandemic and the need to work remotely intensified the importance of fully integrated and operational technology—but the pandemic also put tech projects on hold as companies reduced staffing, implemented hiring freezes, and shifted priorities.

In this environment, focus on the critical work needed to ensure that your enterprise survives the crisis, but stay prepared to implement technology when conditions improve. Doing so will be more important than ever.


Lisa Hart Shepherd is vice president, research and advisory service, at Acritas, a part of Thomson Reuters.

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