Now more than ever, executive leadership must leverage the value of the corporate tax function and actively ensure its early participation in all key strategic initiatives. In today’s rapidly evolving environment driven by geopolitical uncertainty, global tax reform, and technological advances, tax professionals must embrace greater complexity and changing regulations. At the same time, they must overcome significant challenges in budget and human resource allocation, technology deficiencies related to data management and disparate systems, and most importantly, a lack of strategic alignment with senior finance and executive leadership.
These tax challenges are consistent across all companies and industry sectors. Even the most sophisticated, fully staffed tax functions are struggling to acquire and maintain the resources required to manage the immense details driven by this changing market. The systems, processes, and scarcity of human resources available to meet increasing demands are creating significant risks and missed opportunities to perform in an optimal manner. As governments are becoming more aggressive in the pursuit of taxes, it creates increased risks for economic penalties and future audits, additional resources to deal with regulators and compliance issues, and ultimately, reduced cash flow and profitability. To cope with the burden of the increasingly complex environment in which Tax operates, there is a need for capital investment to ensure systems and staff are not overstretched to the point of error or the inability to recover costs. It is critical that tax leadership addresses the compliance trap where high-value activities are giving way to low-value demands, leading to a focus on the urgent rather than the important, and resulting in the misalignment of priorities and resources that deliver the greatest return on investment.
Executive leadership must reframe the tax function’s role, so it aligns with the strategic priorities of the organisation
Real-time reporting demands immediate data access and validation. However, data from multiple and different financial systems and the inability to acquire timely data create significant issues needing increased attention and resources to accurately stitch together various data sets into the required government reporting format. With the tax function’s performance heavily reliant on complete and accurate data, it’s imperative that tax executives assess and transform the processes and systems that collect, analyse, and manage this information. They must also conduct internal reviews of the accuracy on a routine basis to ensure a dynamic and efficient technology environment. All too often, highly skilled tax professionals are charged with making the most of bad systems and processes, which paralyse the tax function’s performance and ability to deliver real strategic value to the organisation. Tax executives who effectively build a business case for making the required technology changes and resource allocations with key stakeholders of the organisation will make monumental strides toward breaking the low-value loop that entraps many tax functions. This is imperative because the regulatory environment is making increasing demands that can only be met through leveraging technology and data analytics to manipulate large volumes of data efficiently. The tax function has an urgent need for the highest calibre people, who not only bring traditional core tax skills but who are also ready to work with technology such as artificial intelligence and robotic process automation, build cross-functional relationships with other departments, and manage the necessary projects for change.
In a world where globalisation and digitisation are transforming all aspects of corporate life, leaders cannot afford to devalue their tax functions and view them as nonstrategic. Tax strategy is more than having effective transfer pricing and income tax processes. Executive leadership must reframe the tax function’s role, so it aligns with the strategic priorities of the organisation. Finance leaders and, by extension the rest of the executive group, must move beyond being focused simply on how the tax function can reduce risk, but rather on the opportunities to reduce cost or increase value. Tax executives in turn should increase their tax function’s involvement in more strategic activities that demonstrate a higher return on investment and gain a more prominent, credible voice with executive management. They must find a way to leverage experience and best practices to transform the tax function into a tax competency centre. They can benefit greatly from a total performance assessment of their current processes relative to their desired objectives and stakeholder expectations. Through benchmarking current performance, identifying best practices in relation to peer and historical performance, and measuring the delta between reality and the department’s potential, tax executives can develop a clear roadmap for transformation. Armed with this vision, tax executives are poised to develop an effective business case that outlines and justifies financial, technology, and human resource needs.
As the largest firm in the world dedicated exclusively to business taxes—successfully elevating the role and importance of the tax function in corporations around the world for almost 30 years—Ryan’s clients have recognised billions of GBP in savings going straight to the company’s bottom line. With recent growth in its European offices and European acquisitions, the Firm is extending its position as the leading indirect tax practice in North America to serve and support more clients throughout Europe.
Ryan helps companies reduce risk—both to reputation and the balance sheet—and align commercial goals with their tax function to pay the right amount of tax and increase shareholder value by partnering with clients’ tax leaders, their teams, and their organisation’s leadership.Is your company paying the right amount of tax? How do you know? Ryan helps ensure you are maximising your opportunities and not overpaying but also mitigating your risks in any jurisdiction in Europe and across the world.
Jon Sweet, president of Europe and Asia-Pacific operations at Ryan, shares insights into promoting the status and strategic role of the tax function within an organisation
What is the key challenge facing tax leaders today?
The increased scrutiny on tax administration from taxing jurisdictions, shareholders, audit committees, and management, combined with the evolving market dynamics, can trap the tax function in a low-value compliance loop as it tries to balance the increased demands of accuracy and risk mitigation against the pressure to run Tax as efficiently as possible. Simply focusing on compliance does not meet the expectations of senior finance executives and the business operations. They want the tax function more involved in planning and creating prospective performance and profitability improvement strategies that complement the organisation’s plan for growth.
The lack of alignment between the realities of the tax executive’s world and the expectations of the chief financial officer often reduces the role of the tax function to mere compliance-related activities at the expense of higher value strategic planning initiatives. As a result, Tax often lacks the visibility needed within the organisation to significantly drive the desired change, develop the business case for additional resources, and demonstrate the strategic responsibility that can break the cycle of the low-value loop.
What is stopping companies from developing a more strategic tax function?
Increased complexity in compliance, the greatest in history, is colliding with inadequate systems and talent management issues to create a serious challenge for tax leaders seeking to elevate the strategic prominence of Tax. Tremendous effort is invested in managing daily activities, which distracts from the more strategic and prospectively focused initiatives.
The tasks associated with managing compliance requirements and resource issues often prevent the tax function from elevating its presence in the organisation. With so much time being spent on necessary, yet less strategic matters, the perception that the tax function is a compliance oriented, nonstrategic member of the corporate finance function is perpetuated, and the cycle of low-value activity is strengthened. The inability of tax and finance executives to appropriately align often results in a preponderance of low-value activities that dominate the resources of the tax function. There’s no silver bullet to this problem, but that’s where Ryan can help—building an assessment of the current position, outlining a plan for best practices, and making a case for change.
How does Ryan change this dynamic?
Ryan evaluates the various factors impacting the present outcomes and provides a multidimensional solution, improving cash flow, profitability, and shareholder value.
Just as important, we also support the tax function’s ability to deliver maximum corporate value, helping it evaluate how it’s prepared to succeed in the eyes of stakeholders and modify its behaviours to achieve desired future results. We support the development of a clear strategy for aligning the tax function with the organisation and create a tax competency center that demonstrates its value as a strategic planning function of the organisation, which elevates its role in planning initiatives related to risk management, capital investments, and overall corporate growth and development.
What would you like to see from your clients?
With Tax facing longstanding issues in the face of a rapidly changing environment, it is critical that it possesses an openness to change. Tax executives can no longer operate independently in today’s environment. It’s imperative that they seek new ways to solve old problems. Also important is the way Tax actively integrates with executive management and business operations to define its success in light of the metrics that drive the success of these stakeholders. Doing so will enhance the ability for Tax to build a plan that garners the necessary investment and support.
What can tax professionals do to demonstrate the need for change to their colleagues?
What makes my fellow tax professionals indispensable is a hyperfocus on the details—but I guess we all need to lift our heads from the desk occasionally to ensure we have a view of the big picture. Elevating the status and strategic role of the tax function within an organisation requires working with partners who understand the bigger picture. Those that can strike a balance between focusing on the additional detail and accuracy required of their tax functions, while effectively reserving time and reallocating resources to focus on more strategic objectives, will see quantum leaps in the visibility and influence of the tax function across their organisations.
What advice would you offer for the future?
To deliver maximum corporate value, Tax needs to align with its key stakeholders to thoroughly understand how it defines success for the tax function and its priorities regarding time and resources. The tax function needs to vigorously evaluate how it is prepared to succeed in the eyes of these stakeholders, modifying today’s behaviours to achieve desired future results. A clear strategy for aligning the tax function with the organisation must be defined. Tax needs to leverage its value as a strategic planning function of the organisation, elevating its role in planning initiatives related to risk management, capital investments, and overall corporate growth and development.