Tax, Tech, and Talent.

• Author: Shepherd, Lisa Hart

Digital transformation of the corporate tax department promises significant return on investment--cost reduction, risk mitigation, and data-driven insights that grow revenue and profitability.

In our 2020 Corporate Tax Departments Survey, Acritas, a Thomson Reuters company, and the Thomson Reuters Institute interviewed leaders of tax departments at twenty-three large US-based companies and surveyed a broader population of more than 300 corporate tax professionals to unearth insights into departmental objectives, challenges, resources, talent, and the use of technology and external advisors. This new survey confirms that technology can be a game changer. In-house tax departments that responded to the survey reported spending an average of ten percent of their budgets on technology. However, departments that allocate more than ten percent to technology spend less overall relative to revenue. This finding strongly suggests that technology creates greater efficiency and lowers overall costs.

The tech transition, however, falls short at many companies. Our findings reveal several key challenges:

* Fifty-four percent of corporate tax professionals said their teams lack adequate resources to do their jobs effectively.

* When asked to describe the state of their tax department and their ability to leverage technology, more than half the respondents chose the descriptors "reactive" or "chaotic."

* Nearly forty percent of corporate tax departments lack specific tax-related skills, and thirty percent lack essential technological skills. Many respondents said they underutilize tax technology because their teams lack the skills, training, support, or time to use it effectively.

Respondents paint a picture of in-house departments striving to reduce international tax liability, provide more business-centric advice, reduce costs, ensure data accuracy, and integrate existing technology.

They described implementing tax technology as both their top strategy to optimize performance and one of their top two challenges. (Managing regulatory change is the other.) As noted above, the difficulty in fully leveraging tax technology is linked to a skills gap in many tax departments.

Asking team members to adopt new practices they are ill equipped to carry out can create an unhealthy, threatening work environment. Some tax department leaders said their teams fear that automation will lead to job cuts, are skeptical of its value, and often resist the use of new...