If you’re a Chief Tax, Financial or Executive Officer, you know that corporate Tax departments across America are on the cusp of a transformation. The profession is shifting and it’s becoming clearer across the entire organization. The shift is due, in part, to the increasing complexities and disruptions on the global and US regulatory landscape.
In addition, rapid advancements in technology have pushed businesses to transform to keep the pace. As more companies realize the benefits of automation, data and analytics, and visualization tools, tax departments must have talent who possess both tax technical skills, as well as advanced technology skills. This combination of capabilities within tax departments is becoming an important determination in driving business success.
Technology must lead the way for tax departments
Although this may be well known across the C-suite, leaders seem to be struggling with putting it into practice. KPMG recently released its annual report, “Tax Reimagined 2022: Perspectives from the C-suite,” which surveyed 300 C-suite executives at companies with over $1 billion in revenue. These leaders were asked about their views on the evolving tax profession, including its future skills composition and the critical tech tools needed to succeed, among other topics.
Instead of finding that tax departments are embracing technology, the survey identified that while leaders acknowledged the importance of mastering new tech skills and tools, organizations are also struggling to leverage technology in the right ways. In 2021, 73 percent of respondents admitted their organizations did not know how to use tax data in a forward-looking way; a year later, we’re still in a very similar place. In 2022, more than half of respondents are not leveraging their tax data to ensure better business outcomes around critical business activities such as ESG, M&As, policy changes and more. Harnessing data is not a manual effort; it requires technology tools that can sift through the immense amounts of data and organize it in a way that makes sense.
We know the C-suite agrees. In 2021, less than a third of respondents saw coding as a necessary skill for tax professionals. This year, that number jumped to nearly half (46%), ranking it as the top skill needed in tax. While I’m less confident that the majority of the tax department should be true coders, two resource capability shifts must happen to succeed in the current environment. First, tax departments must pivot to tax professionals who can run low-code, no-code tech tools, analyze data, and use visualization and modeling tools to help their organizations see around the corner. Second, tax departments need access to experts with a tech first, tax second skillset.
In fact, our survey showed more leaders in 2022 (70%) compared with 2021 (44%) acknowledge that scaling technologies like cloud, D&A, and visualization are relevant to succeed in tax.
Ensuring access to technology capabilities
So, what does this mean for your organization? To be competitive is to have technology capabilities either on-hand or in-house. But right now, there’s a gap between how important leaders view technology and their ability to hire talent with the right skills and/or their willingness to outsource or co-source part or all of their tax department to a provider who has the tech and data capabilities.
Organizations have a few options to remedy the problem. They could reconsider how they’re hiring – and from where. For example, are they searching for a technologist who knows accounting (and not just vice versa)? Or are there upskilling practices in place for individuals to get smart, fast, on tech? Leaders should consider taking a tech-first, tax-second approach to hiring talent to support certain parts of their tax and finance departments.
Beyond modernizing their hiring approaches, it’s also a best practice to consider outsourcing or co-sourcing models on a semi-regular basis. Partnerships with tax tech-savvy organizations that possess the right technology and the capabilities to organize and analyze tax data can drive significant long-term cost savings.
These evolutions certainly won’t happen overnight. But until more of these capabilities are available, either from in-house talent or partnerships with the right service providers, it’s clear that not modernizing corporate tax departments can stall a business from achieving significant growth.
