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26th Annual
Tuesday & Wednesday, January 24‐25, 2017 Hya Regency Columbus, Columbus, Ohio
Oh
io T
ax
Workshop PP
Advanced: The Future Tax Department
is Here!
Wednesday, January 25, 2017 2:00 p.m. to 3:00 p.m.
Biographical Information
Andrew D. Gold, CPA, MPA, Partner, Multistate Tax Practice, Deloitte Tax LLP 1111 Bagby Street, Ste. 4500, Houston TX 77002-2591
[email protected] 713-982-3598 Andy is a Multistate Tax Partner with over 28 years of experience working with clients to address their state tax needs in areas such as income tax compliance, controversy, sales/use tax, credits & incentives, M&A and state tax planning. He has broad industry experience including technology, retail/distribution, energy, manufacturing, and entertainment industries. Andy leads technology and innovation for Deloitte Tax’s Multistate Tax Services practice, responsible for steering Multistate tax technology & data analytics strategy and transforming the ways in which Deloitte Tax and its clients address state and local tax needs through data, technology, and analytics. Andy is also a member of Deloitte’s Corporate Development team, focused on growth through alliances and transactions. Most recently, Andy led the West region’s Multistate Tax Services practice, as well as Deloitte’s Multistate Tax Services Compliance practice nationally. Andy received his Bachelor of Business Administration and Masters in Public Accounting, Tax from the University of Texas. He is a Certified Public Accountant and a member of the American Institute of CPAs. He serves as a speaker at various tax conferences and seminars, including those sponsored by Tax Executives Institute, COST, American Society of CPAs, and various local California and Texas Societies of CPAs.
Brandi Langhans, Tax Technical Director, Nationwide 1 W. Nationwide Blvd., Columbus, OH 43215
[email protected] Brandi started her career in public accounting at Arthur Andersen and Deloitte before joining the Nationwide tax department in 2003. Brandi has had a variety of roles on the Nationwide tax team and is currently leading the tax technology, continuous improvement & special projects group. This team is responsible for the tax applications including tax data governance, managing IT projects and continuous improvement projects within and outside of the department. Brandi has 10 years of tax software implementation and process automation experience including federal, state, income and indirect tax solutions. Brandi is a graduate of Ohio University with a Bachelors of Business Administration, holds a Masters of Taxation from Capital University Law School and is a Certified Lean Six Sigma Black Belt.
The Future State Tax Department is HereLeveraging the power of data and technology26th Annual Ohio Tax ConferenceJanuary 25, 2016
Andy Gold – Partner, Deloitte TaxBrandi Langhans – Director, Nationwide
Agenda
Transforming the Tax Function through Data and Technology
The State of the State Tax Department
The “Art of the Possible”
Analytics in Action – Practical Applications
Getting Started
Questions?
Copyright © 2017 Deloitte Development LLC. All rights reserved. 2
CFOs have new expectations for Tax Executives…
Optimizing the tax function
Strategic partnering across the organizationReporting
Planning
Managing
Emerging additional
expectations
The company’s
tax and finance profile
Process, technology and data management
People Sustainability and efficiency
Business partnering
Clear communication
Leading strategic initiatives
Three traditional roles
Transform … for greater impactDerived from Deloitte stakeholder interviews, including over 80 CFOs, in preparation for Deloitte Tax Executive Transition Labs™.
3Copyright © 2017 Deloitte Development LLC. All rights reserved.
What’s causing the need for tax transformation?
Greater global footprint
Increased Use of Technology
Stricter, More Aligned
Regulations
Why tax? Why now?
Increased Competition
The proliferation of new technology solutions and a past decade of effective finance and HR transformation create the opportunity to re-engineer the tax function
Global capital market and government transparency expectations, global tax policy collaboration led by OECD and global regulatory information sharing have reset the global regulatory environment.
Intense competition is driving business innovation and strategy activity that presents opportunities for tax to participate in, and inform, choices that reshape business portfolios to impact the next decade of shareholder value.
Businesses continue to globalize. Tax Executives are increasingly demonstrating the desire to implement a global approach to tax planning, tax reporting and managing tax risk.
Derived from Deloitte stakeholder interviews, including over 80 CFOs, in preparation for Deloitte Tax Executive Transition Labs™.4
Copyright © 2017 Deloitte Development LLC. All rights reserved.
Despite late adoption, there are many opportunities for analytical tax planning
Despite being a quantitative field, tax has been slow to embrace analytics
Transactional, compliance focus of software
Not enough data to analyzeTax structures and data are complex
Demand from executives just beginning to emerge
Some regulatory agency practices are ahead of companies
Technology & Transformation —Tax is a late adopter
Copyright © 2017 Deloitte Development LLC. All rights reserved.
6 Turning vision into value Copyright © 2016 Deloitte Development LLC. All rights reserved.
Stages of Tax Transformation
• Know your company’s aspirations
• Tax departments should envision their own intelligent enterprise technology as their primary blueprint and roadmap to deploying their end-state BI visions
6Copyright © 2017 Deloitte Development LLC. All rights reserved.
8 Turning vision into value Copyright © 2016 Deloitte Development LLC. All rights reserved.
Current State of State Tax DepartmentsState Tax Departments Have Four Responsibilities
Strategic Risk Planning
Tax Accounting Risk Mitigation
Compliance Activities
High Value Add
Higher Value Add
Low Value Add
8Copyright © 2017 Deloitte Development LLC. All rights reserved.
9 Turning vision into value Copyright © 2016 Deloitte Development LLC. All rights reserved.
What our clients are saying
IT/Tools25%
Data…Skillset
20%
Budget23%
Ye…No
24%
Extremely14%
Exploring 46%
Not embrace…
BEPS7%
Indirect taxes20%
Transfer pricing/IC
24%
Direct taxes49%
Source: Deloitte Dbriefs Tax Operations Series, September 17, 2015 Tax Data Analytics: A New Era for Tax Planning and ComplianceResponses received from approximately 3000 participants; excludes “N/A” or “Don’t Know”
Improvement in tax access to data?Biggest challenge in executing
an analytics strategy?
Tax focus around data analytics: Tax analytics used to address:
Somewhat52%
9Copyright © 2017 Deloitte Development LLC. All rights reserved.
10 Turning vision into value Copyright © 2016 Deloitte Development LLC. All rights reserved.
• Need people who understand both tax and analytics!
• Universities not turning them out now
• Perhaps easier to start with a quantitative person and teach them tax than vice-versa
• Tax planners may be a good starting point
• Need to harmonize and integrate tax data across the organization
• Spreadsheets may proliferate multiple versions of data and terminology
• Need to include tax data in enterprise data warehouse
Two key resources facilitating Tax data analytics
Human Infrastructure
Data Infrastructure
10Copyright © 2017 Deloitte Development LLC. All rights reserved.
12 Turning vision into value Copyright © 2016 Deloitte Development LLC. All rights reserved.
Tools today give you – the user – the power
Excel connected to ERP systems
Drag and drop data queries supporting ad hoc reporting
Tax platforms enabling application model
Tax ownership
IT freed from helping Tax, now able to do their
day jobs
Copyright © 2017 Deloitte Development LLC. All rights reserved. 12
Leveraging Technology to Drive Value
DATA ANALYTICSThe age of Microsoft Excel
spreadsheets (“Excel”) and
manual data crunching is long
over.
VISUALIZATIONThe purpose and business value of
Tax data analytics is to get answers
and ultimately tell a story.
Visualization enables the context
of the story to stay in tact.
BUSINESS INTELLIGENCE = DATA + ANALYTICS + VISUALIZATION
Big DataMDM
Hadoop Exalytics
HANANetezza
Structured dataUnstructured data
In-Memory …….
Oracle BICognos
Micro StrategyBusiness Objects
Power BICloud Analytics
SASSPSS……
TableauQlik View
TIBCO - SpotfirePyramidAlteryx
Microsoft …….
Copyright © 2017 Deloitte Development LLC. All rights reserved. 13
BUSINESS INTELLIGENCE = DATA + ANALYTICS + VISUALIZATION
Data Management - DOTSDefine – Business Priorities Objective – Achieve Efficiency
• Do we have this data?• Do you spend most of your time in data preparation or business
driven analysis?• How much time would you need to conduct a new “What If”
analysis from data preparation to Data analytics to reach Desired results?
• Do you know what your competition and industry is doing in this area?
• Establish trusted source for your Tax processes• Establish tax enablement in your enterprise initiatives
like ERP transformation and Financial transformation• Advance your tax technology in par with the industry
and build the ability to transform into an Analytical Tax Department
Technology – Strategic Enablement• Automate data flow avoiding manual processes (ETL / ELT /
ODI)• Single source of truth with an integrated technology• Analytics platform enables actionable intelligence• Data visualization leading to better business decisions• Cloud technology enabling faster decisions• Advanced analytics enabling proactive decisions
Standard – Industry & Regulatory
• Speed to Market• Insights turned into intelligence• Improved processes and efficiency• Better Planning for efficient tax provisioning• Faster forecasting
Copyright © 2017 Deloitte Development LLC. All rights reserved. 14
BUSINESS INTELLIGENCE = DATA + ANALYTICS + VISUALIZATION
While every organization needs a custom architecture that meets their specific imperatives and requirements, a general vision for Intelligent enterprise BI architecture can be useful to provide a departure point for discussions on leading practices and capabilities.
ILLUSTRATION OF ANALYTICS USING Oracle BI landscape: Intelligent enterprise
CMOCFO
CHROTAX VP
COO
CIO
• Sales Analytics• Service Analytics• Marketing Analytics
• Financial Analytics• HR Analytics• Profitability Analytics• Tax Accounting
Analytics
• Tax Payments Analytics• Tax Forms Analytics• HFM Analytics• Hyperion Analytics
• Procurement & Spend Analytics• Supply Chain Analytics• EDGE Analytics
• Strategic Performance & Analytics• Geospatial visualization & Analytics• Executive Dashboards• Interactive Analytics
• Source Integration• Real Time Analytics• Data Governance
Copyright © 2017 Deloitte Development LLC. All rights reserved. 15
BUSINESS INTELLIGENCE = DATA + ANALYTICS + VISUALIZATION
Data visualization tools like Tableau provide rapid-fire authoring environment that can be used to create and publish views, reports and dashboards and the “POWER” of ad-hoc dashboard development is made available at USER LEVEL
Copyright © 2017 Deloitte Development LLC. All rights reserved. 16
DATASingle Source of Truth
Tax Tech + ERP
Departing point for Discussion
Visualization on top of Analytics =More Meaningful Insights
BUSINESS INTELLIGENCE = DATA + ANALYTICS + VISUALIZATION
Analytics ToolsOracle BI/ SAP / MicroStrategy….
Copyright © 2017 Deloitte Development LLC. All rights reserved. 17
18 Turning vision into value Copyright © 2016 Deloitte Development LLC. All rights reserved.
Technology enabling a better approach
Integrated approachTraditional approach
Spreadsheets
3rd party admin
Vendor Systems
Disconnected tax processes
Many users, multiple points of entry
Disparate Systems & Data Sources
Tax Compliance
TaxPlanning
InvestorReporting
AuditDefense
Integrated tax processes
Many users, single point of entry
Integrated platform
Tax Compliance Tax Planning
Investor Reporting Audit Defense
Data | Calculations | Reporting
Analytics | Visualization | Dashboards
What is NEXT?
Compared to
18Copyright © 2017 Deloitte Development LLC. All rights reserved.
19 Turning vision into value Copyright © 2016 Deloitte Development LLC. All rights reserved.
Bringing the “Pie in the Sky” to our workplaceThe Art of the Possible
OCR
Robotics
Cognitive Platforms
Block Chain
Artificial Intelligence
The “IOT”
• Partnership K-1s• Invoices • Amended returns
• E-filing automation• Compliance sub-processes• Document management
• Transfer pricing
• Credits & Incentives • Indirect Tax • Income Tax Diagnostics• Other ??
• Indirect tax recovery
• Motor Fuels
Copyright © 2017 Deloitte Development LLC. All rights reserved. 19
Cognitive advantage can help address some of the sector trendsNew technologies show significant application for Finance and Tax, delivering sustainable savings and efficiencies
You must look to technology for sources of sustainable cost reductions
Deg
ree
of
Co
gn
itio
n
LowMedium
High
Intelligent Automation Cognitive AutomationRobotic Process Automation
“Mimics human judgment”
Tools that allow for the natural language generation based on a dataset and business rules to
Applications: Invoice processing and filing, workers comp. filing,
underwriting advisor etc.
“Mimics human actions”
Computer program or “robot” that mimics rules-based actions in
existing applications
Applications: Invoice receiving, 3-way matching, customer credit assessment, reconciliation etc.
“Augments Human Intelligence”
Computerized models that simulate human thought processes through
predictive decision making
Applications: Creation of competitor analysis, advanced planning &
predictive forecasting etc.
Artificial Intelligence
“Mimics Human Intelligence”
The theory and development of computer systems that can perform
tasks which normally require human intelligence
Applications: Self-sustaining reconciliations etc.
Futuristic
20Copyright © 2017 Deloitte Development LLC. All rights reserved.
The “Digital-shore” is eroding the benefits of traditional cost reduction levers, while creating new capabilities
Automation is the new transformation engine for Finance and Tax
Automation can be deployed quickly, with low risk, while delivering significant benefits
Automation outperforms other forms of cost reduction on multiple measures
The Digital Workforce, once an emerging concept, now has proven applications –technology is no longer an enabler of your workforce, it is the workforce
A New Workforce
A “Digital-shore” strategy, leveraging nascent technologies, is the natural progression of more traditional offshoring and outsourcing options
Evolution of theDigital-shore
Technologies, like Robotic Process Automation, complement many existing or proposed cost reduction initiatives and can help accelerate realizing benefits
Challenging the Status Quo
Unlike other options, it is possible to pilot automation and explore opportunities at a low cost to reduce risk during full scale implementation
Automation yields larger cost benefits than traditional opportunities and can act as a hedge against uncertainties like offshore labor rates
The benefits from automation can be recognized faster than traditional cost reduction initiatives due to a shorter planning and execution timeline
21Copyright © 2017 Deloitte Development LLC. All rights reserved.
Tax TechnologyRobotic Process Automation (RPA)
RPA is… RPA is not…
Software configured to operate other software
Automation to replace humans performing repetitive, rules-based tasks
Able to operate any software on your computer
Walking, talking auto-bots
Physically existing machines processing paper
Artificial intelligence or voice recognition and reply software
RPA is delivered through software that can be configured to undertake rules-based (deterministic) tasks
22Copyright © 2017 Deloitte Development LLC. All rights reserved.
Opening email and attachments
Logging into web/ enterprise applications
Moving files and folders
Copying and pasting
Filling in forms
Reading and writing to databases
Scraping data from the web
Making calculations
Connecting to system APIs
Extracting structured data from documents
Collecting social media statistics
Following “if/then” decisions/rules
IN AN RPA SOLUTION, ROBOTS ARE CAPABLE OF MIMICKING MOST USER ACTIONS
Tax TechnologyRobotic Process Automation (RPA)
Copyright © 2017 Deloitte Development LLC. All rights reserved. 23
25 Turning vision into value Copyright © 2016 Deloitte Development LLC. All rights reserved.
Utilizing data analytics to surface insights and actionVisualization use cases
Tax data warehouse
Indirect
Compliance/ Provision
Transfer pricing
Credits & Incentives
Controversy
State apportionment
25Copyright © 2017 Deloitte Development LLC. All rights reserved.
Some ways to get startedLeveraging the power of data and technology
`Identify “Pain Points”
Standardize processes
Assess the “Art of the Possible”
Develop automated data
solution
Apply data analytics
Data health check
Explore opportunities
to apply artificial
intelligence
27Copyright © 2017 Deloitte Development LLC. All rights reserved.
Contacts
Andy GoldPartner | Deloitte Tax LLPMultistate TaxHouston, [email protected]
Brandi LanghansDirector | NationwideColumbus, [email protected]
29Copyright © 2017 Deloitte Development LLC. All rights reserved.
This presentation contains general information only and the respective speakers and their firms are not, by means of this presentation, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This presentation is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. The respective speakers and their firms shall not be responsible for any loss sustained by any person who relies on this presentation.
About this presentation
30Copyright © 2017 Deloitte Development LLC. All rights reserved.
About DeloitteDeloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.
Copyright © 2017 Deloitte Development LLC. All rights reserved.Member of Deloitte Touche Tohmatsu Limited
Expectations of the tax function are evolving
Real transformation requires a diverse team
Three factors driving the transformation imperative
Next steps for CFOs and tax executives
Implications of transformation for four central stakeholders
It’s the tax department’s turn
The Transformation of Tax: Something Big is Happening Here 1
In recent interviews with chief financial officers, two notable and recurring themes have emerged:
• CFOs have new and very specific expectations of the tax executives and tax operations within their organization.
• Those finance leaders share a sense of urgency to transform the tax function– to elevate its capabilities to match those of the finance function and other areas of the business that have already undergone transformation.1
Why is tax rising to the top of CFOs’ priority list? What are they asking for? And what is this new emphasis likely to mean for tax executives, tax departments, and tax advisers? To begin finding answers to these questions, it’s important to understand changing expectations of the tax function and the drivers of change. Tax executives who respond early and strategically can be leaders in transforming tax and elevating its role in the business.
1Deloitte interviews with CFOs from across industries in preparation for Tax Transition Lab sessions, 2013-2014
As used in this document, “Deloitte” means Deloitte Tax LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.
The Transformation of Tax: Something Big is Happening Here 3
The need for tax departments to elevate and expand their role in the business isn’t new, but the demands being placed on them are, both in type and intensity. Mandates from CFOs and other important stakeholders across the business that are driving this shift include:
Become a stronger partner to the broader business Companies are continually refining their business structures and CFOs often lead the associated transformation initiatives. Tax executives are well positioned to work with CFOs and business unit leaders in their decision-making processes by clearly articulating why tax matters and identifying areas where potentially significant value can be gained by taking a tax-aligned approach.
Do what you’ve been doing . . . better As business model transformations are undertaken, refinements to the operating models typically follow – i.e., roles, responsibilities, processes, technology, data, and sourcing strategies across the organization. CFOs indicate that they expect the tax organization to continue performing its traditional tax planning, compliance, and risk management duties, but do so in a more sustainable and efficient manner. To accomplish this, CFOs expect tax executives to enhance tax function operations for greater impact.
4
Expand your thinking and role The current environment requires tax professionals to learn about the broader business and how tax considerations integrate into its decision making and approach to risk management. The tax organization can help lead strategic initiatives in which tax cost is a major decision factor.
Communicate effectively The C-Suite, the board of directors, and the audit committee can all benefit from clearly presented insights into tax issues – in language those stakeholders understand and in the context of business issues to which they can relate. How is the tax function generating value for the business? What are tax executives doing to build sustainable tax processes around compliance and reporting? How are tax personnel leveraging technologies used by the rest of the finance function? What is the succession plan for critical tax professionals? The ability to answer questions like these with confidence can show stakeholders that you are effectively evaluating, managing, and communicating tax issues.
The Transformation of Tax: Something Big is Happening Here 5
When asked in a Deloitte Dbriefs webcast how closely integrated tax and finance are within their organizations, nearly half (48%) of the more than 1,800 non-Deloitte participants responded that the two functions have only a minimal or moderate level of collaboration.2
2Polling results, “Tax and Finance Convergence: The Trend and Its Impact,” Deloitte Dbriefs, March 20, 2014.
The Transformation of Tax: Something Big is Happening Here 7
Transformation has been a pervasive theme in the business world for much of the past two decades, parallel to and enabled by the emergence of enterprise resource planning (ERP) systems. Successful initiatives in areas such as manufacturing and supply chain, human resources, sales and marketing, customer relationship management, and, of course, finance and accounting underscore how the effective application of organizational design, process improvement, and enabling technology can improve efficiency and performance while driving value for the business.
While these functions undertook the massive, at times painful, path to transformation, the tax function was often relegated to the sidelines or completely overlooked as a “black box” of arcane rules and requirements. Recently, three factors have driven the tax function to the forefront of transformation opportunities, with profound implications for tax executives and departments, and even their tax advisers:
8
Three factors driving the transformation imperative
The evolution of commercial tax applications One of the most important developments accelerating transformation of the tax function is the expansion of tax-specific modules for ERP and enterprise performance management (EPM) systems, as well as indirect tax applications. Having converted businesses to these systems over the past couple of decades, ERP vendors are now heavily focused on integrating functionality passed over in initial implementations, tax in particular. In the past few years, vendors have begun acquiring providers of tax provision, compliance, and risk management software and integrating this functionality into their systems, or developing it themselves. They also have expanded the scope of system functionality from a local focus to a global focus to address the global tax requirements of multinationals. These new technology approaches enable wholesale process change and, in turn, become a catalyst for re-engineering tax department professionals’ roles and responsibilities.
Growing regulation and business complexity Increasing regulation is a familiar challenge for businesses in virtually every industry. The continuing introduction of new requirements in a company’s traditional markets, as well as the rules applicable in new markets, both tax specific and more broadly, are creating new levels of complexity and concern for tax departments. The country-by-country interpretation of the Organisation for Economic Co-operation and Development’s (OECD’s) Base Erosion and Profit Shifting (BEPS) initiative and guidance is one recent and prominent example. Legislators and tax authorities in jurisdictions around the world are passing new laws and boosting enforcement efforts to combat perceived actions by businesses to avoid income taxes. In this context, business complexity grows. As businesses look for new ways to create shareholder value, the complexity of where (new markets), what (new businesses), and how (built or bought) new business is conducted increases. Tax executives need to be at the table informing business choices about potential tax costs and insights about possible tax risks.
Accelerating globalization Intense marketplace competition is driving companies to look for opportunities to grow beyond their traditional markets. Entry into new markets requires companies to account for, report on, and plan for taxes under different and potentially unfamiliar regimes. Tax considerations can be pivotal in strategic decisions regarding expansion and adaptation of business structures and operating models. As a result, businesses increasingly are transforming their global tax-related processes from a decentralized approach to a standard global approach, often integrating tax operations into shared services centers, standardizing technology platforms, and integrating with globally standard financial processes.
The Transformation of Tax: Something Big is Happening Here 9
Implications of transformation for four central stakeholders
10
Transforming the tax function places new demands on everyone involved in planning for and fulfilling the many tax obligations companies have today:
The CFO The need for tax transformation has profound implications for CFOs. The CFO will often need to serve as the chief champion of transformation, laying the groundwork for change, both in the tax function and across the business. Throughout the transformation journey, the people involved may look to the CFO to clearly communicate evolving expectations. Perhaps most important, the CFO will likely take the lead in assembling the financial resources, talent, capabilities, and political support needed throughout the business to make transformation a success.
Tax Executives The role of the tax executive can be viewed as having four faces: an operator, who balances tax department costs and service levels to fulfil compliance and planning responsibilities; a steward, who is charged with protecting and preserving organizational assets; a strategist, who provides specific tax direction and aligns tax department activities with broader business strategies; and a catalyst, a driver of action across the business to support financial goals. Interviews with key stakeholders considering tax department transformation reveal a majority of tax management spends most of their time as operators or stewards of the business, leaving them less time to spend in the value-add roles of catalyst or strategist for organizational change and growth. Transformation offers tax executives the opportunity to expand their skills in these two vital and challenging roles and increase their value to the organization.
The Transformation of Tax: Something Big is Happening Here 11
Tax Personnel As tax leaders assume more expansive roles, they will look to their tax personnel to carry out traditional responsibilities more efficiently while developing new skills to support activities relating to those four faces. In a shift similar to that experienced by finance, sales, and other functions, ERP integration will provide tax personnel with greater access to data, workflow applications, and analysis tools. These tools will help tax personnel to free up time that can be deployed toward more value-added activities or to fulfill new requirements. Certainly tax personnel will need to refine processes used in their traditional roles.
Tax Advisers To help get the most from their people and data, tax executives will look to tax advisers for help in ramping up new processes and technologies, aligning the tax function with business strategy and operations, and deploying talent. Advisers can also play an important role in addressing the change management implications of transformation, as well as filling skill and resource gaps until the new organizational structure and processes are stable.
12
Interviews with key stakeholders considering tax department transformation reveal a majority of tax management spends most of their time as operators or stewards of the business, leaving them less time to spend in the value-add roles of catalyst or strategist for organizational change and growth. Transformation offers tax executives the opportunity to expand their skills in these two vital and challenging roles and increase their value to the organization.
The Transformation of Tax: Something Big is Happening Here 13
Real transformation requires a diverse team
14
Industry and business-specific knowledge so tax transformation aligns with broader finance function and enterprise objectives.
Tax technical expertise to devise new ways of gathering, analyzing, and using tax information.
ERP and tax technology experience for tying together the other elements through the underlying data and systems.
A team with this combination of skills
Change management skills to encourage adoption of changes resulting from the transformation, guide and support necessary training to support adoption, and effectively communicate throughout the transition period.
SuccessfulTransformation
In the context of this type of cross-functional team, technologists certainly will be instrumental in configuring systems, developing interfaces, and connecting tax applications to the broader enterprise systems. But tax- technical specialists will be vital for verifying that relevant, accurate tax information is being collected and used appropriately across the dimensions of tax planning, compliance, reporting, and analytics.
As many organizations have discovered in change initiatives, transformation is often complex, and it’s almost always difficult. From a technology standpoint alone, challenges can arise in implementing tax functionality akin to those that plagued ERP implementations, such as unclear requirements, unrealistic expectations, user adoption issues, hidden costs and delays.
Finance and tax leaders could encounter a belief within their organizations, and perhaps their own minds, that tax technology is a “silver bullet” that will solve many issues. But realizing the benefits of transformation will most likely require process and organizational redesign, as well as technology implementation and even culture change.
These diverse elements will demand more than tax or technology experience alone to translate new requirements into definite roles, responsibilities, processes, workflow, and governance and controls. A tax transformation team will need to possess a combination of skills:
The Transformation of Tax: Something Big is Happening Here 15
The importance of cross-functional skills
A Fortune 100 global technology company discovered the benefits of the cross-functional approach as it sought to centralize its international tax data collection process, migrating from more than 700 spreadsheet packages globally to OneSource Workflow Manager (OWM). The objectives of the initiative were to improve the quality of information used inside and around the company’s tax compliance process and to streamline tasks completed by its corporate tax department.
An integrated team of international tax specialists and tax technologists worked together to redesign the international tax package for each of the company’s foreign legal entities, including branches. The team developed and assisted in the implementation of a technology solution that bridged tax information from OWM to the company’s overarching compliance system; created an Internet-based data
collection tool; supported integration of different software packages; and enabled extraction of tax data from OWM.
The project produced tangible impacts for the technology company, including:
• Reducing the amount of time that package preparers and business units spend gaining access to the tax packages
• Allowing for business units to monitor progress in real time
• Reducing the use of email
• Increasing visibility into the status of each package
• Enabling online access to interested authorized parties, even those outside of the tax department
• Streamlining the movement of data from tax packages to consolidated reports and the company’s chosen compliance system
The Transformation of Tax: Something Big is Happening Here 17
Transformation will place significant demands on finance and tax leaders. Taking a structured approach to the transformation process can help smooth the transition, identify issues as they arise, and capitalize on opportunities along the way. Important elements of such an approach include:
Planning Align tax department and business objectives. Understand the goals of the business and what it will look like in five years. Identify how the tax department can help the business achieve its objectives and set goals and direction accordingly. This will put the tax department in lock step with the broader business and help make the business case for investment and change.
Envision the future-state tax department. With business and tax goals in view, strategically consider the people, process, and technology components that the
tax department will need, including: information and analysis the business should have; the likely scope of the regulatory landscape that will need to be addressed, both in the United States and globally; and the skills and experience tax department professionals will need to address regulatory and business requirements. If your business goals are transformative, your tax department’s evolution will need to be as well.
Create a roadmap. Understand current tax department capabilities, areas of underperformance, and tendency to focus on activities that are not strategic to the function and overall organization to determine what it will take to reach the new vision. The transformation could take three to five years, so prioritize the initiatives and use early improvements in efficiency to fund or make the business case for future investment.
18
Execution Enhance and streamline tax processes. Create greater efficiency through technology-enabled processes – a key element of transformation is to free up tax professionals’ time so they can address emerging needs and provide strategic value to the business. Early opportunities for process improvement should be those that involve multiple handoffs, long cycle times, support from multiple tools, and quality or risk issues.
Evaluate enabling tools and technologies. No one-size-fits-all technology solutions exist, so consider tools that are compatible with existing ERP platforms and other vital business systems to facilitate integration with minimal enhancement. Analyzing data will be just as important as reporting on it, so look for systems and tools that provide broad analytics capabilities, from identifying data anomalies to modeling various planning scenarios.
Design new organizational models. Take the opportunity to white-board
Support the change. The changes implemented will not only be new to your tax department, but the rest of the business. Dedicate time to creating a plan that generates awareness inside and outside the tax department of the vision and new capabilities the tax department can offer. Within the tax department, set clear expectations and align performance management systems as needed.
roles, responsibilities, and skills the tax department might need to support the vision. Besides tax and accounting backgrounds, consider other types of experience that can support business collaboration and teaming, including project management, technologists, mathematics (e.g., decision sciences), and finance. This exercise can help with development of a training program for existing tax personnel who might take on new roles, as well as a recruiting effort to locate external resources, if needed.
Communication Measure results. Formalize the strategy by developing an effective set of key performance indicators. It takes time and resources to track progress; and measure and communicate results…but it is an important step. Helping the C-Suite understand your transformation journey and the real impact it is having will create better transparency and leadership alignment; and build continued support and confidence.
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For years, tax departments remained in the shadows as transformation swept across other business functions. Now, it’s the tax department’s turn to step into the spotlight. With a clear view of how the tax function’s role can evolve and expand, and the commitment of the CFO and tax executives, something big can indeed happen. The tax function can enhance operational efficiency at a global level and contribute significantly to decision-making across the business. Its operations can become more transparent to CFOs and other senior executives, from performance and risk management perspectives, in much the same way other business functions have become in the past decade or two. And, importantly, tax executives and other tax specialists – especially those willing to develop a broader understanding of the business and play leadership roles in the transformation – should be able to build eminence within the business and lay the foundation for career growth in the future as the business reaps the rewards of the transformation.
The Transformation of Tax: Something Big is Happening Here 21
Out front, leading our clients through change
For nearly a decade, Deloitte has observed the growing momentum to transform the tax function. During that time and in anticipation of the types of tax transformation businesses are now undertaking, we have been evolving our own organizational structure, building our resources, preparing our people, and strengthening our alliances. We are intent on leading our clients through whatever change they’re dealing with, helping them pursue their business objectives with the highest quality and integrity. Our tax-technical, technology, and management consulting specialists find innovative ways to help tax departments uncover insights and solutions for navigating an increasingly complex global environment. In this way, we are helping tax departments have a greater impact within their organizations.
Copyright © 2016 Deloitte Development LLC. All rights reserved. Member of Deloitte Touche Tohmatsu Limited
This publication contains general information only and is based on the experiences and research of Deloitte practitioners. Deloitte is not, by means of this publication, rendering business, financial, investment, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte, its affiliates, and related entities shall not be responsible for any loss sustained by any person who relies on this publication.
ContactsFor more information on Deloitte’s Approach to Tax Department Transformation, contact your Deloitte adviser or one of the transformation leaders listed below:
Nathan AndrewsPartner Deloitte Tax LLP +1 919 546 8055 [email protected]
Jodie BeiningDirector Deloitte Tax LLP +1 414 347 7902 [email protected]
Scott ShaferPrincipal Deloitte Tax LLP +1 312 486 5340 [email protected]
Jeff AusnehmerPartner Deloitte Tax LLP +1 703 251 4131 [email protected]
For more resources that can help address the challenges tax departments face today, visit: www.deloitte.com/us/taxtransformation.