The global tax landscape is evolving rapidly
The regulatory tax landscape is constantly evolving. The list of recent—not to mention significant—developments is long, including the OECD’s Pillar Two rules, the introduction of CESOP (Central Electronic System of Payment information) and ViDA rules (VAT in a Digital Age) in the EU, as well as e-reporting and e-invoicing mandates.
These changes increase compliance requirements and have a significant impact on your tax strategies and operations. Preparing for them is on everyone’s mind—so much so that “complying with evolving tax laws and regulations around the world” was the number-one challenge cited in Deloitte’s 2023 Tax transformation trend survey.
Top challenges for the next five years
While compliance remains top of mind, tax departments are also concerned with the need for accurate, timely tax-related data; tax technology and data management expertise; and maintaining influence over tax technology strategy and investments. Deloitte’s 2023 tax transformation survey engaged 300 senior tax and finance leaders worldwide to understand their future vision for the tax function. Here’s how they ranked the top tax challenges for the coming three to five years:
- Complying with evolving tax laws and regulations around the world
- Integrating tax-related data across the company
- Limited technology/data management expertise
- Lack of sufficient control over technology strategy and investment.
- The good news is that there’s plenty tax departments can do now to rethink their approach to tax accounting and compliance, and to prepare for the approaching global changes.
- Preparing for tax tech challenges, today and tomorrow
- The tax department should be a strategic partner to the business. The right tax technology can facilitate greater compliance and productivity while increasing visibility for the business. To better protect business value while ensuring compliance and control, here are some key tax tech strategies to consider:
- Develop an informed, proactive approach to tax compliance. Global tax changes, specifically Pillar Two, will have new, evolving, and complex effects on multinationals’ accounting and tax processes. An informed, proactive approach—one that includes a clear understanding of the rules; detailed assessments of existing systems; and a targeted, compliant response—can help minimize operational disruption. Modeling is a great way to increase the ability of the tax department to meet compliance objectives, while simultaneously evaluating the business value of various options. Now is the time to make sure your tax department has the people, data, processes, and technology in place to ensure compliance with the new rules and understand their financial impact.
- Carefully integrate tax-related data. To comply, your tax data must be accessible, in the right format, and at the right level of detail to be deemed “fit for use.” Pillar Two, for example, requires that companies report more than 100 new accounting, tax, and business data points—all of which take time and effort to identify, access, or create. Your tax team will need to determine where the required data will come from, and which tools they’ll need to access it.
- Bulk up your technology and data management expertise. Keeping up with global tax and regulatory changes is likely to require new tax technology and additional data-management skills. Some companies are working to customize their existing ERP systems, while others are looking at new installations. No matter the tech approach, companies will also need the skills to prepare systems and data. Tax departments should evaluate options from investing in in-house resources or hiring new talent to outsourcing. See Figure 3 of our report for more options.
- Increase influence over tech strategy and investment. While data management and IT applications are becoming more and more important to tax departments, few directly control these factors. In Deloitte’s 2023 Tax Transformation survey, 78% of respondents reported that “technology strategy and planning was largely controlled by Finance or IT,” while 56% said that “the tax department has input into the process” and 22% said “the tax department had little input.” To make the case for tax technology needs, tax departments must demonstrate the value they generate and protect for the company. This requires internal education, including highlighting the financial and compliance implications of evolving tax regulations. Helping finance and IT stakeholders understand tax priorities also helps raise tax’s profile within the organization—positioning tax as a business advisor and ensuring that tax teams have a say in transformation and technology conversations.
- Playing the long (and collaborative) tax tech game
- The need to be a strategic business partner that protects business value while ensuring compliance requires a long-term, collaborative approach to tax technology.
