Corporate tax professionals need better tools to manage data in post-Sarbanes environments.

• Author: Prow, Greg

Tax departments continue to shoulder a great deal of responsibility for regulatory reporting. In most cases that responsibility is woefully out of balance with the resources and tools available to them. And the job is not getting any easier. The need to have accurately documented tax positions and comply with section 404 of the Sarbanes-Oxley Act of 2002 is pushing tax professionals to consider new on-demand software that does not blow the roof off shrinking operating budgets.

Today, corporate tax departments are faced with a daunting array of responsibilities and pressures that were unheard of five years ago. The compliance burden alone has grown significantly as heightened regulations are forcing unprecedented tax transparency, accuracy, and currency:

* Regulatory agencies, including the SEC, the PCAOB, and the IRS, have all increased their scrutiny and are requiring more transparency and currency, forcing the need for much greater data accuracy;

* Still evolving Sarbanes-Oxley compliance and reporting requirements are driving unprecedented focus on internal controls over data;

* Company management is requiring greater detail and accuracy on transactions while at the same time tax is struggling with time and resource constraints;

* Regulatory agencies are becoming more technologically adept in the areas of audits, analytics, and forensics to improve their own ability to raise revenue from corporate taxpayers; and

* The continued passage of new federal and state tax laws continue to complicate the tax filing process and reporting requirements.

Addressing these new issues not only strains budgets and internal staff; it can also have a far more negative effect on the company as a whole. Increasingly sacrificed are the valuable planning and strategy activities that make the tax department a true business partner to the company and can help drive competitive advantage.

For years, tax departments have relied on a fairly consistent arsenal of assets, including tax technical knowledge, execution skills (such as gathering data and managing the return process), and financial information systems and technology. Combined, these assets enabled the tax department to manage planning, compliance, and audit processes. The relative weighting of each asset in the mix has remained consistent, principally because the environment has not changed. The mix has most commonly been exemplified by significant use of outside tax technical resources, less than optimal use of internal execution skills, and minimal use of...