Managing the 'tax trilemma': Your comprehensive website guide in disruptive times
Rewritten Article:
Hey there! Here's an insightful take on the changing world of corporate tax, straight from Rema Serafi, Vice Chair of Tax at KPMG. (Please note, opinions are her own.)
In today's fast-paced business world, the tax game is more intricate than ever. You might have heard us at KPMG talk about the "tax trifecta" - the impending end of Tax Cuts and Jobs Act (TCJA) provisions in 2025, the ongoing global tax deal by the OECD, and storms of regulatory change. These factors are dramatically altering the rules of the game for corporate tax functions. A recent survey of 500 U.S. C-suite executives reveals that the changing landscape demands a fresh perspective on how organizations manage and perceive their tax departments.
Tax: A Whole New Ball Game
The survey results are clear: 95% of executives agree that predicting and planning in the current tax environment seems nearly impossible. But, complexity breeds opportunity, and the challenge provides a golden chance for our organizations to elevate the tax department from a simple compliance unit to a strategic powerhouse.
One big concern for many is the "tax cliff" in 2025, when numerous TCJA provisions are due to expire. If these provisions do expire, potential tax increases of over $4 trillion could send shockwaves through businesses, with 71% of executives expecting a high to moderate impact on their companies. Meanwhile, the implementation of Pillar Two (the global minimum tax) is expected to be costly, with 86% of respondents voicing concerns about increased compliance burdens.
Embracing Tech and Data
In this complex landscape, technology becomes a vital ally. Almost all executives (98%) plan to invest in artificial or generative artificial technology for their tax functions in the coming year. This tech is seen as a crucial tool for navigating challenges like Pillar Two implementation, with 88% of leaders viewing it as essential.
However, leveraging technology effectively goes far beyond simple investment. The real value lies in embracing data. Over 95% of executives agree that better using data across the organization will empower their tax teams to stay ahead of obstacles and make smarter, more strategic decisions. Yet, only 60% of leaders report that they regularly use data to drive decision-making.
Tax Departments: Stepping Up to the Plate
It's time for a reality check: tax departments are not what they used to be. Today, these teams need to step up to the plate as strategic partners that drive organizational success. In fact, 90% of C-suite leaders now view their tax department as a crucial player in increasing trust among multiple stakeholders.
The transformation in the role of tax departments calls for adjustments in talent models and operating structures. For instance, there's a growing preference for hiring tech experts who can gain tax knowledge rather than the old approach of hiring tax experts with inadequate tech skills. Furthermore, 87% of leaders are increasingly open to using managed services arrangements to tackle complex regulatory hurdles like Pillar Two.
The Road Ahead for Us
As organizations navigate this transformation, consider implementing the following strategies:
- Tech Upgrade: Prioritize investments in AI and data analytics to boost predictive capabilities and streamline compliance.
- Break Silos: Encourage collaboration between departments, like tax, finance, IT, and others, to drive data utilization and foster innovation.
- Learn and Grow: Develop a workforce that excels in both tech skills and tax knowledge.
- Elevate Tax Research: Elevate the tax department's role in strategic decision-making and stakeholder trust-building.
- Consider Alternative Models: Explore managed services or co-sourcing arrangements to access specialized skills and technologies.
The tax world is no walk in the park, but it's brimming with potential. By embracing change and positioning tax departments as strategic assets, organizations can not only endure the current turmoil but also drive themselves toward greater resilience and success in the coming years.
As a tax leader, I've witnessed firsthand the transformative impact of a strategically positioned tax function. Companies ready to adapt to the current upheaval and redefine their tax departments will find themselves at the forefront of organizational innovation and growth - though the challenges may be daunting, so too are the rewards for those prepared to lead through this era of disruption.
- In the tumultuous tax landscape, predicting and planning is challenging for 95% of C-suite executives, but this complexity presents an opportunity for tax departments to evolve from a compliance unit to a strategic powerhouse.
- With TCJA provisions expiring in 2025 and the implementation of Pillar Two (global minimum tax) on the horizon, 71% of executives anticipate a high to moderate impact on their businesses, highlighting the need for effective tax solutions.
- In this complex environment, technology investment is almost universal among executives, with 98% planning to use artificial or generative artificial technology in their tax functions next year.
- However, the true advantage lies in data utilization, as over 95% of executives recognize its potential to empower tax teams and make more informed, strategic decisions, yet only 60% currently use data to drive decision-making.
- As the role of tax departments evolves, there's a growing preference for hiring tech experts with tax knowledge (rather than the reverse), and 87% of leaders are open to managed services arrangements to address complex regulatory issues like Pillar Two.
- To thrive in this changing landscape, organizations should prioritize tech upgrades, break departmental silos, foster workforce development, elevate tax departments' roles in strategic decision-making, and consider alternative models like managed services or co-sourcing arrangements to access specialized skills and technologies, transforming tax from a challenge into a strategic asset for growth.
