Hyper-regulation leaves no place to hide: an unprecedented level of regulation and new legislation are expected to have a major impact on tax and finance departments. Tax is transforming from a departmental, siloed process to an enterprise function, as tax and finance departments are increasingly integrating to improve productivity and manage tax risk and compliance.

• Author: Norton, Bob
• Position: TAX TRENDS

When the "official" end of the recession was announced last year, the recovery seemed incomplete and shallow for many businesses, corporate leaders and individuals. From a corporate perspective, the economic fallout continues to reverberate into the new year, impacting everything from staffing and capital expenditures to increased tax regulation and reform.

Indeed, the need to address unsustainable global deficits is driving an unprecedented level of regulation and new legislation resulting in widespread implications for tax and finance departments.

Convergence of U.S. generally accepted accounting principles and International Financial Reporting Standards, more aggressive tax enforcement, federal, state and international tax reforms and increasing demands for transparency are making one thing certain in an environment of total uncertainty: workloads for corporate tax departments will increase notably in 2011 and for a number of years into the future.

At a time when operational budgets remain static, new workload levels will create tax and financial reporting risks--issues of major concern to chief financial officers, controllers and audit committees. The rapid pace and extent of these changes are already causing systemic reverberations in how corporations manage global tax risk and new practices will evolve as the future unfolds.

To manage them, finance and tax departments will continue to become progressively more integrated operationally. Increasingly, both departments are turning to process improvement and automation through enterprise solutions for needed transformation to better manage risk, and that will continue to set the trend for tax departments this year.

As if excessive workloads and the risk of material weaknesses weren't reason enough to improve corporate tax process efficiency and accuracy, companies now need to prepare for aggressive audit tactics and disruptive tax reforms by governments worldwide.

Unlike past economic periods when governments acted separately to enact reforms, these same governments are now working in tandem and taking joint action to address ever-widening budget shortfalls at national, state and local levels.

Transparency, Audit Sophistication And Cross-Border Collaboration

While the Internal Revenue Service has been pursuing an agenda of transparency in recent years, last year it reached a whole new level with the issuance of Schedule UTP (Uncertain Tax Position). Apparently, the agency determined that FIN 48 financial statement disclosures did not provide enough insight into a company's aggressive tax positions. As a result, taxpayers must now submit Schedule UTP with their Form 1120, disclosing all uncertain U.S. federal tax positions in the order of potential size of exposure.

While the IRS softened its position in response to industry outcries during the Schedule UTP comment period, it will still require increased attention in 2011 from companies with more than $100 million in assets. The issuance of Schedule UTP is a game-changing event in IRS policy and will likely be mimicked by states and foreign countries.

In another sea change in transparency practices, more than 80 countries have committed to "international cooperation in tax matters." According to the Organization for Economic Co-operation and Development (OECD), since 2008, the number of multilateral tax information exchange agreements between countries has grown from only 44 to more than 600.

With more than 60 double-tax treaties and more than 25 tax information exchange agreements in place, IRS Commissioner and sitting Chair of the OECD Forum on Tax Administration Douglas Shulman will continue pushing an agenda of...