Tax and finance functions continuously face challenges, such as; tax and regulatory changes, digital disruption and audits. These challenges are forcing companies to re-evaluate their operations and processes to ensure they are ready for the future.
Finance functions often address these challenges via finance transformation programmes. For these projects to be successful for finance including tax, Tax must participate to ensure it retains its ability to meet its compliance obligations using high-quality data, and to help enhance the overall operational effectiveness of finance.
Finance transformation projects do not always receive significant participation from tax. Some of our observations in this regard are:
- Tax does not have an independent voice as part of finance transformation projects.
- Budget allocated to tax as part of the overall finance budget can be limited, and may not be considered a priority area.
- Enterprise Resource Planning programmes are generally driven by finance.
- Tax data requirements are determined by finance.
- System functionalities are not tested for tax.
- Acceptability of finance recommendations by tax is limited.
- Finance control frameworks are adapted to tax control equivalents, resulting in missing controls for tax (Adapt vs Adopt).
With the unprecedented pace of legislative changes and disruptions that tax functions are facing, it is clear that continuing on the traditional path without adapting, evolving or transforming the way tax functions operate is not sustainable.
Today tax functions are being called upon to play a stronger role, and actively contribute to helping organisations evaluate and determine their future paths. There is a growing need for tax functions to either run independent transformation programmes, or integrate themselves in overall finance transformation programmes.
Strong collaboration between finance and tax functions enables identification of potential issues and opportunities, such as; the ability to meet compliance requirements, greater efficiencies and improved risk management. Finance transformation projects are an opportunity for tax functions to:
- Position themselves as primary ‘customers’ of the programme.
- Redefine data and business requirements.
- Ensure authority to review and approve project stages.
- Obtain appropriate resources to ensure tax requirements’ gathering, design and testing is adequately covered for tax.
Success indicators for tax and finance transformation
The success of a transformation programme is dependent on the outcome of a robust roadmap for tax and finance:
- Defining an integrated vision for future state tax and finance function.
- Undertaking gap assessment – current vs future state.
- Defining the target operating model.
- Creating an integrated roadmap and business case for change.
- Effective communication and change management.
Transformation is a journey, and collective participation from tax and finance functions can enhance the overall transformation synergies, and enable tax to be a valuable strategic partner.
The next article in this series will consider Indirect Tax and Transfer Pricing and their impact on finance transformation.
