Nearly seven in ten (65%) companies say they lack a sustainable data and technology plan to implement their tax and finance function’s purpose and vision. Companies also face a challenging environment characterised by unprecedented legislative and regulatory change, significant talent challenges and the need to do more with less, only magnified by the impact of COVID-19. This is according to a new EY Tax and Finance Operate report that surveyed 1,013 organisations globally.
In response to these challenges, nearly all organisations (99%) said they are acting to transform their tax and finance operating models and 73% of organisations said they are more-likely-than-not to co-source critical activities in the next 24 months to relieve these growing pressures.
“Businesses are wrestling with a choice between building out their own capabilities - utilising the right people and technology to keep up with change - or working with a third-party provider that is 100% focused on the task and has the scale to succeed,” commented Kate Barton, EY global vice chair - Tax. “The demands on today’s tax professional have also increased. They not only need to have world-class tax technical knowledge, but a deep understanding of data and science, with proficiency in tools such as artificial intelligence, automation, machine learning, data governance and analytics.”
Unprecedented pace of change and cost pressures
The pace of legislative and regulatory change is overwhelming tax and finance functions, with 85% of survey respondents anticipating an increase in their workload to comply with emerging digital tax filing requirements.
In response to US and other major tax reform, 83% of large companies - those with revenues of US$20bn or more - say they received additional budget to implement the changes. Over two-fifths of all companies (44%) estimate a spend of at least US$10m over the next five years to comply.
All the while, tax and finance functions are having to do more with less, with nearly eight in ten (79%) of respondents planning to reduce the costs of their tax and finance function over the next two years.
“I’ve been practicing tax for more than 30 years and I’ve never experienced this velocity in change with laws and regulations,” said Dave Helmer, EY Global Tax and Finance Operate leader. “It’s a paradox. Not only do companies need to spend more to comply with new laws and regulations, but they also need to prepare for a reduction in cost over the long-term.”
Data and technology transformation deficits
Adding to the growing regulatory demands on tax and finance functions are a deficit in technological capabilities, with only 3% of tax function’s surveyed making extensive use of disruptive technologies such as AI and machine learning. Fifteen percent of organisations are not using them at all. Those that aren’t investing in data and technology as part of a transformation strategy are potentially limiting effective delivery of their tax function’s purpose and vision in the long-term.
Changing talent needs
Another challenge lies in both recruitment and retention of talent, with 45% struggling to provide new responsibilities and career advancement opportunities for their tax and finance personnel. In addition, 62% of tax and finance functions spend the majority of their time on routine compliance activities - as opposed to higher valued-added activities.
Also, a clear majority of respondents (83%) believe the core technical competencies of their tax and finance personnel must be augmented to include more data, process and technology skills over the next three years.
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