Transforming the tax function through technology

Tax teams across the world are facing mounting challenges as a result of cost pressures, increasing demands from tax authorities and new requirements from their own organisations. Increasingly, they are being required to do much more with a lot less and the only viable solution is to embrace technology as a means of transformation.

“Covid-19 has pressure-tested companies and their internal tax processes and technology solutions,” says Johnny Wickham who leads PwC’s tax technology and transformation team. “They have had to find out what works, what doesn’t and how to do it while working remotely. It’s been an extraordinarily challenging time.”

This comes at a time when the demands on tax teams are greater than ever before. “Organisations expect their tax teams to align with their broader strategic priorities,” says Wickham. “And this is coming at the same time as businesses are being forced to implement cost-reduction programmes and tax authorities continue to implement ever more onerous obligations. Easing this burden necessitates a technology enabled response.”

Tax and technology are already high up on the agenda for CEOs, he points out. “PwC’s 2021 CEO survey found that concerns about the speed of technological changes on business growth are at a record high in all of the years of the Irish survey – which we started in 2006. Over 70 per cent of CEOs said that they were concerned about this. Also, 63 per cent are concerned about tax policy uncertainty, that’s up from 52 per cent at the same time last year.”

Wickham believes that these results reflect the current uncertainty not only due to technology but also due to the changing tax environment.

“The tax landscape is changing rapidly and tax authorities around the globe are investing in technology solutions for data interrogation and analysis, and tax functions need to keep up and keep ahead. Businesses are also worried about who is going to pick up the tab for Covid-19 when governments have to start addressing the high levels of debt built up during the pandemic.”

Those concerns translate into additional demands on tax teams and the big question is how technology can help tax teams take the extra strain.

“Technology is key to taking the load off and adding value,” Wickham says. “We are helping clients understand how technology can support their tax function. Some clients are already on a tax technology journey and have made the investment. Others have just started out and need help with the first step. There is so much information out there that it can lead to uncertainty.”

Where to start

Begin with existing technology. “The key challenges in maximising the use of technology within tax functions include the lack of easy access to clean and robust data; tax reporting systems not being optimised; and multiple users making similar data requests, absorbing time and goodwill of the IT function,” says Wickham,.

“The tax function should look to broader business trends like digital transformation to meet this challenge. Agility is no longer nice to have, it has become a critical business imperative.”

The question is where to start the journey. “It is important to identify where you are now, where you want to be and what investments need to be made,” says Wickham. “You need to understand your current processes and associated pain points. Where are the risk areas, inefficiencies and how are they impacting the tax function? After that, consider your current and future resource requirements and needs.”

Tax technology investment can pay immediate dividends in a number of key areas, according to Wickham.

Technology is key to taking the load off and adding value

The first is in terms of efficiency and effectiveness. “Tax teams spend a significant amount of time on manual and repetitive tasks – ranging from data extraction or data manipulation to tax calculations and reporting obligations. These tasks, which previously took days or weeks to perform, can be reduced to minutes. This will help tax teams cope with the increased demands being placed on them. Automation can also enable teams to better integrate data and processes, enhance analytic capabilities and deliver better quality output in less time.”

It will also have a positive impact on the workplace. “Quite apart from the improved quality of work it also makes for a more positive work experience. That in turn will lead to improved staff retention at a time when talent is in extremely short supply. Tax teams need to go on a journey with other teams in the organisation and get to a point where they don’t see new automation and robotics technologies as a threat, but as an opportunity to add greater value and spend more time on more interesting work.

“You also have to think about governance. As part of defining and implementing any tax technology transformational strategy or solution, a governance framework is essential. To achieve returns over the long term, optimised processes need to be supported and monitored.”

But it’s not just about technology and the process. “Digital transformation is all about people and skills where training and upskilling are critical. PwC started its own digital transformation journey a few years ago and now over 90 per cent of our people have attended a digital academy. We realised we had an obligation to our clients to keep pace with changing times. Every organisation needs to take stock and upskill to be able to meet the challenges that lie ahead.”

Resilience

Citing the PwC 2020 CFO Pulse Survey, he notes that 50 per cent of chief financial officers globally are looking to their IT teams and their technological resilience during Covid-19 to accelerate automation and new ways of working. “Digitisation is also on top of Irish CEOs’s agendas in terms of changing their businesses and identifying efficiencies. Taking an agile approach to this work is vital – and it is essential to start now.”

The tax landscape is changing rapidly and tax authorities around the globe are investing in technology solutions

While companies understand the value of technology to improve processes, drive efficiency and manage risk, many have yet to define strategic objectives for tax technology and invest in it. “When companies are thinking about their technology strategy, they need to think about tax as part of that,” he adds.

“For example, ensuring an optimal tax configuration as part of any ERP [enterprise resource planning] system upgrade is critical. Making that investment can transform the tax function into an in-house strategic partner. Increased demands and the changing environment have put a strain on resources while highlighting gaps in processes, technology and sometimes skill sets. Companies need to think broadly and examine whether the tax function’s historic ways of operating can meet the organisation’s goals going forward.”

Wickham concludes, “82 per cent of Irish CEOs surveyed in PwC’s 2021 CEO survey are planning to increase their investment in digital transformation and tax needs to be front and centre of that.”

[ pwc.ie/taxtech ]