Tax functions around the world are undergoing transformation against the backdrop of persistent pressure and challenges that disrupt the way businesses operate, said EY recently when releasing results of its latest EY Tax and Finance Operations survey.
The survey canvassed 1,650 tax and finance leaders in more than 40 countries around the world, according to the company.
- Most organisations (84%) are planning to transform their tax and finance functions over the next two years, galvanised by a need to tackle critical challenges related to talent, regulation and technology, often with budget constraints.
- A large proportion (81%) of respondents said they are “more likely than not” to co-source certain tax and finance activities within the next 24 months, with this figure rising to 96% for organisations with revenue of US$30 billion or above.
- 70%said that the experiences of the past two years have sharpened their focus on the need to transform their functions.
- Almost all the leaders surveyed (95%) say they are reallocating budget so that they can focus on strategic priorities.
The “work from anywhere” response to the COVID-19 pandemic, is now entrenched in many industries and presents new considerations for companies, including those relating to where they are operating, EY noted.
Survey results indicate that 55%of respondents say they will face additional tax and reporting obligations in the coming years because of a more geographically dispersed workforce, adding unanticipated complexity to their tax compliance obligations.
The second issue companies face is finding properly skilled tax professionals, according to EY, adding that 95%of the business leaders surveyed pointed to a skills gap in the tax function and believe there is a need for tax and finance professionals to update their skills in relation to data, processes and technology over the next two years if they are to keep up with the fast pace of change.
These pressures are compounded by the volume and pace of global tax reforms, including the development of new global minimum tax rules, EY observed.
Almost one-third of respondents (32%) say uncertainty about their ability to identify, evaluate and respond to looming regulatory and legislative change is the biggest barrier to success, survey results indicate.
In addition, many also harbor concerns about increasing costs, EY noted.
Close to two-third of respondents (59%) say compliance with new digital tax filing obligations will ramp up expenditures, and 83% expect to spend at least US$5 million and an average of US$11.1 million over the coming five years, to help ensure they adhere to the new rules.
The pandemic also made many businesses realise they lacked up-to-date data and technology tools when their workers ended up being separated from their files during COVID-19 lockdowns, EY said.
Half (50%) of the largest businesses said their lack of a sustainable plan for data and technology is the biggest barrier to delivering their tax function’s purpose and vision, survey results indicate.
Businesses are clearly under pressure to do more with less, with 87% of companies planning to reduce the costs of their tax and finance functions in the next two years, EY noted.
Nevertheless, most still plan to invest, with 70% saying they intend to spend US$2 million or more on tax technology over the next three years, the firm added.
Besides the above types of pressure, the tax function is also under growing pressure to play a bigger role in helping their organisations address environmental, social and governance (ESG) objectives, said EY.
Nearly half (46%) of respondents said environmental and climate risks are the most important ESG issues facing their organisation in the next two years while nearly all (94%) say they are co-sourcing ESG reporting activities or considering doing so, according to survey results.