With the bulk of 2022 in the rearview mirror, it has become clear that the only constant for corporate tax departments around the globe is the state of flux in which they all find themselves.
Against a backdrop of economic uncertainty, a host of new regulatory and compliance challenges have cropped up – from a rapidly-growing list of environmental, social, and governance (ESG)-related issues, to the newly-minted Inflation Reduction Act, which not only enacts a minimum corporate tax, but also infuses $80 billion into the IRS to help enforce it. Meanwhile, corporations have been racking up record numbers of M&A deals while the Great Resignation has caused a mass exodus from the accounting profession, putting overworked tax departments under further duress. To say a corporate tax team would relish a slow-news day would be an understatement.
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In fact, according to new research from Thomson Reuters
TRI
, the level of stress these departments are facing is beginning to become unsustainable. Among the 580 corporate tax pros surveyed, 64% said the biggest obstacle currently preventing them from achieving their professional development goals is a simple lack of time.
From the results, it’s clear that the tax department has reached a tipping point. Corporate tax teams are under intense pressure to supply governments with tax data faster and more accurately than ever before, and as the goalposts keep moving, most are struggling to keep up with this breakneck pace.
Seventy-three percent of respondents expect to see changes in government tax requirements in jurisdictions in which they operate over the next two years — a 16-percentage point increase over last year – and virtually all (92%) of those working in the tech sector expect regulatory changes this year. All the while, corporate tax departments are also being asked to do more internally, such as collecting and analyzing data across the enterprise, conducting wider ranging risk assessments, providing strategic intelligence, participating in business planning, and finding new ways to extract value for the corporation, all with fewer resources.
Just how scarce are these resources? Over half (57%) of tax departments said they feel they do not have the resources they need to meet the challenges they face.
The direct consequence of these additional demands is that the professionals doing the work in corporate tax departments are feeling squeezed. As a result, older employees are retiring; 58% of tax professionals over the age of 60 say it is unlikely that they will be working at their current company in the next five years, due primarily to retirement. All the while, mid-career professionals are fleeing more frequently, and younger workers are strongly indicating they want a better work/life balance, leaving companies in a tight spot when it comes to meeting the growing demand for skilled tax and accounting talent.
This is where technology comes in and saves the day, right? If only it were that simple. Technology is, of course, useful when implemented properly, with corporate-wide buy-in from top-to-bottom. But predictably, the less resources a firm has, the more likely it is that their approach to technology is unorganized. What’s more, 76% of tax departments said any investment in technology comes out of their own department’s budget compared to 13% that said it came out of the information technology department’s budget. If an accounting team is already under-resourced, it’s unlikely an investment in game-changing technology is coming anytime soon.
That means that corporate accounting teams need to get nimble in how they deal with these new challenges. Ramped up investment in technology will need to be part of the equation, but tech alone will not be enough. Corporate tax departments need to be able to work smarter, not harder as they confront today’s challenges, and that’s going to involve not only having the tools to streamline workflows and deliver more timely insights, but also nurturing a culture of innovation and a commitment to employee development, which technology can also empower.
The tax and accounting functions of today’s multinational corporations needs to evolve from a cost center that simply observes and reports to a strategic asset that leverages real-time data and predictive analytics to forecast trends, anticipate risks and guide key business decisions.
In an ever-evolving landscape, the list of global disruptors can change by the day. As a result, tax and accounting professionals must not only follow recent developments and be prepared to capture the effects in their financial statements, they must also develop a plan to make adjustments on the fly. It’s a Herculean task, but the stakes are high enough to justify the investment in the type of technological and cultural transformation required to drive this change. Time will tell which companies will rise to the occasion and which will be left behind.