How organisations can optimise value of their tax and finance functions

Rebalancing of resources can give tax and finance leaders the ability to shape strategy, innovate and have a greater impact on the business.

In brief

• Organisations that adopt the hybrid model can position themselves to redirect resources and focus on the most strategic finance and tax issues.
• Tax and finance functions will need to focus on the three key challenges of talent, technology and data, and legislation and regulation.
• Rebalancing of resources can transform tax from a compliance focused function to one that gives the leaders insights into broader business decisions.

The 2022 EY Tax and Finance Operations Survey (TFO survey), which surveyed 1,650 executives in over 40 jurisdictions and a dozen different industries, has found that businesses are actively transforming. The survey finds that 84% of respondents are reshaping their tax and finance operating models, with automation, use of shared service centres and co-sourcing with external partners high on the agenda.

This transformation is having a direct and profound impact on budget allocation. The TFO survey shows that 95% of companies intend to rebalance tax and finance spending with less being allocated to routine activities such as tax compliance and more to strategic activities such as tax policy and planning. Furthermore, 87% of companies plan to reduce the cost of the tax and finance function in the next two years, with 81% saying they are more likely than not to co-source tax and finance activities.

Power of the trio

With increasing pressure to do more with less, tax and finance functions will need to focus on the three key challenges of talent, legislation and regulation, and technology and data.

Talent

Businesses across every sector are facing difficulties attracting and retaining the right talent. People with the right combination of specialised tax, data, and technology skills are in short supply. Indeed, 95% of TFO respondents believe their tax and finance personnel will need to augment those skills in the near term. In many cases, it is easier to work with a vendor which can offer those skillsets.

Legislation and regulation

Organisations contending with the unwinding of temporary pandemic support measures must also face ongoing regulatory change. And that includes the OECD agreement in October 2021 on new global minimum tax rate of 15%.

In addition, 59% of TFO respondents believe that complying with emerging digital tax filing requirements will increase the cost of running the tax and finance functions.

Technology and data

Tax and finance functions can not only bring more value to the entire enterprise but also do so at lower cost when they have advanced technology and data at their disposal. This enables them to better project the tax implications of broader business decisions such as acquisitions and disposals as well as the impact of tax law changes.

Technology comes at a cost, however. That presents a difficulty at a time when many businesses are seeking to reduce costs. It is not surprising, therefore, that 56% of the respondents are actively seeking to work with providers who already possess those data and technology capabilities.

Some organisations still intend developing internal capabilities, but a hybrid approach is the best model. Organisations that adopt that model can position themselves to redirect resources to focus on the most strategic finance and tax issues.

That rebalancing of resources can give tax and finance leaders the ability to shape strategy, innovate and have a greater impact on the business. It can transform tax from a compliance focussed, business-as-usual function to one that gives the organisation’s leaders insights into the full potential of broader business decisions. 

A flexible transformation strategy

Transformation can take many forms. There is no one-size-fits-all approach and while some businesses may decide to address these challenges internally, others may opt for co-sourcing arrangements, and others still will choose a hybrid model with elements of both. Very importantly, when deciding on the approach to take, businesses need to adopt a strategy which is flexible and can evolve and adapt to changing circumstances.

Taking the following four steps can help to ensure a successful transformation of the tax and finance function: