Disrupting the Norm: Using Technology to Reinvent State Tax Compliance; It's time to free up capacity and deal with remote work.

AuthorFoster, Bridget

In the current business environment, the only constant in the face of major economic and societal shifts is dynamic change. As companies forge ahead, their tax departments increasingly lead the way in sustainably transforming their business models and their digital and strategic footprints.

Tax leaders are remaking their technology infrastructures to free up team capacity, operate more efficiently, and use data more effectively. Meanwhile, all this change is happening during an unprecedented global shift to remote and hybrid working. These trends have profound implications for the future of tax and business models in general.

Tax Work Reimagzined

Until recently, manual processes and disparate systems forced tax teams to spend hours classifying, reformatting, and preparing data to meet compliance obligations. That burden is lifting as the tax function embraces robotic process automation (RPA) and new resourcing models. The impetus to automate is both internal--enabling team members to focus on higher-value work--and external, as tax authorities push businesses (in some cases mandating them) to digitize their tax operations.

Dramatic shifts are underway in how tax work is done. A recent Deloitte survey of 304 tax professionals found that deeper automation, for instance, is a top priority for forty-one percent of respondents in terms of changing how compliance processes are managed, which will alter the day-to-day roles of tax professionals.1 Figure 1 shows the specific strategies that respondents are prioritizing to manage compliance workloads.

Tax leaders are prioritizing these strategies to help their teams manage compliance workloads

Increased automation and reliance on shared service centers are the top choices for tax leaders looking to leverage lower-cost resource models for routine tax compliance work.

More automation of lower-value repeatable processes in the tax department 40%

Implementing/increasing our use of shared services centers 40%

Migrating activity out of the tax department to other teams within the business 39%

Outsourcing model for managed services Exploring full outsourcing models 32%

Traditional outsourcing to a third-party provider Consolidating our outsourcing relationships 25%

Figure 1

Q. Which of the following strategies will be most important in enabling a lower-cost resourcing model for processes and activities, such as in: tax provision, transfer pricing documentation, corporate income tax returns and payments, etc.

Base = 304. Respondents were able to select up to 3 options.

Figure 1. Strategies that 304 surveyed tax professionals say they are using or plan to use to manage compliance workloads at a lower cost.

Tax leaders are evaluating all areas of their tax function to identify potential opportunities to streamline processes, leverage technology, and bring enhanced value to the organization with their current team. The state and local tax function is often an area where tax leaders turn to achieve early results from their efforts to transform tax. With numerous state and local jurisdictions requiring quarterly and/or annual reporting, based on data that may come from multiple sources in varying degrees of completeness and typically requiring hours of manual manipulation and analysis, the state tax function can consume all of its resources for compliance processes alone--leaving little time for planning and supporting the company's objectives.

Rethinking the Tax Function

As the realities of managing state tax become more complex and the pressure to do more with less intensifies, state tax leaders are looking to new technologies to help them manage compliance, provisions, and planning. Executives want the state tax function to become a better business partner, to provide more insights, and to create more value--all with the same budget or less. These strategic expectations of C-level executives require a fundamental change in how such work is performed.

Thankfully, the timing is right from a data and technology perspective. The past decade has seen an explosion of enterprise data at increasingly granular levels. At the same time, technology tools have matured...

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