Two fundamental assumptions will underlie most of what is written and discussed about tax management in the coming years. One is that the world inhabited by tax and accounting professionals is becoming more "complex." The second is that tax professionals need to embrace new technologies to meet this growing complexity head on.
There is plenty of truth to this complexity/technology trope, but it tends to be obscured by a lack of understanding about the nature of complexity and the role technology plays in both creating and solving the problems of twenty-first-century taxation. As with most things involving technology, the situation facing tax professionals is really much more complicated than most people realize, even those who live it every day of their working lives.
Let's start with the tax code itself. When decrying the complexity of the U.S. Internal Revenue Code (IRC), pundits often note that the IRC has bloated to more than 4,000 pages--the result, primarily, of lawmakers using the tax code as a mutual punching bag for public policy. Indeed, according to the nonprofit Tax Foundation, Americans will collectively spend more than eight billion hours dealing with their taxes just this year, hours that will amount to more than $300 billion in lost productivity. But the IRC's hefty page count is not the only culprit. For tax professionals, the difficulty of digesting the IRC is compounded by the more than 400 updates and changes the tax code receives every year and the confusion such a Band-Aid approach to tax policy inevitably causes.
Constant tweaking of the tax code introduces uncertainty and unpredictability into an already mystifying equation, resulting in errors of omission, awareness, interpretation, and computation. The irony of course is that many of these changes and addendums are made in the interest of "simplifying" the tax code. The 2017 Tax Cuts and Jobs Act (TCJA) was in fact billed, by its proponents, as a necessary overhaul of a needlessly complex system. Although the TCJA did simplify the process for many individual taxpayers by raising the standard deduction, corporations--especially multinationals--have had a somewhat different experience.
The Complexity Trap
For multinationals, complexity comes in the form of ever-changing regulations, stricter compliance and reporting requirements, more data-intensive processes, and a host of other factors, including a global push for something close to realtime taxation...