BEPS 2.0 readiness is top of mind for CFOs and tax leaders, survey finds

• 90% of CFOs and tax leaders surveyed globally (SEA 94%) expect a “significant” or “moderate” impact from BEPS 2.0, but only 30% globally (SEA 17%) have completed an impact assessment
• 51% globally (SEA 73%) say they struggle with motivating talent and avoiding burnout
• 95% globally (SEA 92%) are more likely than not to co-source tax and finance activities in the next two years

The rapidly changing regulatory landscape is creating a significant challenge for tax and finance departments, according to the latest EY Tax and Finance Operations Survey (TFO). Amid these challenges, tax and finance functions face potential budget cuts due to a turbulent economic environment, while still simultaneously transforming their functions. The survey, which polled 1,600 CFOs, heads of tax and finance professionals across 32 jurisdictions, which includes more than 60 in Southeast Asia (SEA), finds that while a growing number of tax and finance functions are transforming – 96% of businesses globally (SEA 95%) compared to 84% (SEA 90%) five years ago – the pressures faced are becoming more intense and urgent. 

Regulatory readiness deepens challenges

Many large global businesses are bracing for sweeping reforms as governments implement the Organisation for Economic Co-operation and Development’s (OECD)/G20 base erosion and profit shifting (BEPS) 2.0 rules including global minimum taxes under Pillar Two. The survey finds that 90% of global respondents (SEA 94%) expect to experience a “significant” or “moderate” impact from BEPS 2.0, but only 30% (SEA 17%) have completed a BEPS impact assessment.

Beyond BEPS 2.0, a range of other compliance complexities are putting pressure on tax and finance functions. These include the US corporate alternative minimum tax, green and sustainability taxes, the EU’s Carbon Border Adjustment Mechanism and an accelerating pace of countries converting to e-invoicing. Finally, businesses also face a sharp uptick in formal and informal requests for tax and finance information from authorities.

Elaine Yeo, EY Asean Tax and Finance Operate Leader, says:

“We are in the middle of an unprecedented time, as tax regulations and financial standards are evolving very quickly and changes are significant. Organizations are pressured to consider functional and digital transformations to better leverage data and technologies to improve reporting and compliance efficiency and quality.  

“Importantly, given the vast variety and volumes of transactional data and data sets, consolidating and distilling data manually is not an effective nor efficient way to obtain quality data. Instead, companies need to leverage technology for this. Those who do will probably have an easier time complying with changing laws and regulations and their tax and finance functions may be better positioned to provide more strategic value to their organizations.

Elaine observes that organizations in Southeast Asia are still adopting a “wait-and-see” approach toward BEPS 2.0, given the fluidity of the rules currently. She says:

“While there may be complexities in the BEPS rules and administration of it, companies need to focus on operational readiness and get ready soon. Local tax authorities are also introducing new initiatives like e-invoicing, which can mean more strain on tax and financial resources. Hence, companies need to adjust their people and processes, and prioritize their BEPS 2.0 implementation to comply with regulatory requirements.”

Struggling to harness the power of new technologies

Converting tax and finance functions into modern, data-powered operations is being driven by many factors, yet one in particular is a need to be responsive to tax authorities who are increasingly asking for real-time data. Businesses also want their tax and finance functions to provide high-value strategic counsel on the business’s overall direction and to do so quickly and efficiently. However, 48% of global respondents (SEA 39%) cite the lack of a sustainable plan for data and technology is the biggest barrier ​to achieving this vision.

Tax and finance leaders are also skeptical that emerging technologies like generative artificial intelligence (AI) will have an impact on their work. Eighty-five percent of global respondents (SEA 86%) state that they do not believe generative AI tools will help drive increased effectiveness and efficiencies within their tax function.  

Elaine says:

“We see that finance and tax professionals are increasingly taking up more commercial roles and strategic business roles in their organizations. As a result, companies are now hiring talent with technology or e-finance experience for these positions, and leveraging technology or outsourcing models for manual and repetitive tasks for better efficiency and effectiveness. For example, emerging technologies such as artificial intelligence can help to analyze vast amounts of data more quickly and accurately; and identify hot spots or red flags with better accuracy for better risk management and informed decision-making.”  

Tax departments faced with talent challenges

The survey revealed that tax leaders are grappling with a range of talent issues. Fifty-one percent of leaders say they have moderate to significant struggles with motivating talent and avoiding burnout within the teams. Meanwhile, 63% of global respondents (SEA 74%) say their employees will need to augment their tax technical skills with new data, processes and technology abilities in the next three years. And 29% of global respondents (SEA 36%) say they do not have enough highly skilled professionals capable of monitoring, evaluating and implementing tax legislative and regulatory change around the world.

Notably, respondents that co-source 25% or less of their workload are more likely to report that they are struggling with these issues than those that co-source higher concentrations.

Co-sourcing surges as a solution

These collective pressures are causing companies to analyze their options for creating modern, agile tax operating models, and co-sourcing with third parties is emerging as a preferred way to achieve this. Ninety-five percent of businesses globally (SEA 92%) are now more likely than not to co-source tax and finance activities, a 22-percentage point (SEA 20-percentage point) increase since 2020. Meanwhile, 35% of companies globally (SEA 39%) say co-sourcing with a provider who has significant capabilities in data, technology and shared service center delivery is the most important change they need to make to their operating model.

More than half (global 59%, SEA 67%) say the ability to develop their team and provide opportunities to work on more strategic activities is the most significant benefit of partnering with a provider to co-source multi-country tax compliance and statutory reporting activities, while 18% of global respondents (SEA 9%) identify cost savings as the biggest benefit.

Elaine says:

“Countries in Asia-Pacific like Singapore, South Korea, Japan, New Zealand and Australia have enacted or will be enacting the global minimum tax. Hence, companies should start reviewing or assessing the financial and operational impact of BEPS Pillar 2 on their business, and work with internal and external stakeholders for effective implementation and drive value efficiently. Importantly, data, technology, and expertise are the heart of those outcomes.

“The increased complexity requires businesses to have a strong understanding of international tax laws and regulations. Hence, co-sourcing provides businesses the immediate access to specialized knowledge to help them navigate the complex regulations across global operations effectively while focusing on their core competencies and strategic initiatives.”

-ends-

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About the survey

The 2023 EY Tax and Finance Operations Survey was conducted by Oxford Economics from April to May 2023.