John Gotts on Tax Function Effectiveness: The Importance of Data Management is the Tax Function

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Episode 20: John Gotts on Tax Function Effectiveness: The Importance of Data Management is the Tax Function

Release date: May 4, 2010
Guest: John Gotts
Running time: 10:35 minutes

Enhancing data available to the tax function is critical to a successful technology plan. With tax directors facing pressure to do more with less, they are turning to third-party software solutions to improve their tax accounting and other tax decision-making systems. In this episode, PwC’s John Gotts stresses the importance of proper data management when designing and when implementing these third-party solutions.

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Through interviews with prominent PwC tax subject matter professionals, Tax Tracks is an audio podcast series that is designed to bring succinct commentary on tax technical, policy and administrative issues that provides busy tax directors information they require.


John Gotts on Tax Function Effectiveness: The Importance of Data Management is the Tax Function

You're listening to another episode of PwC's Tax Tracks at This series looks at the most pressing technical and management issues affecting today's busiest tax directors.

Gerry Lewandowski: Here with us today is John Gotts, a partner with PwC’s Tax Management and Accounting Services group based in Toronto and the national leader of PwC Canada’s Tax Function Effectiveness practice. John has been with PwC for a number of years and has worked with many Canadian businesses in delivering various solutions for improving the governance and administration of the tax function. John is with us today to share his experiences and discuss the importance of managing data in the tax function.

We previously discussed in Episode 6 of Tax Tracks the importance of making technology investments to improve management of the tax function. We discussed integrating existing technologies, spreadsheet remediation and involving tax in strategic technology implementations. Of critical importance to any successful technology plan for the tax function is to enhance the value of data available for the tax function. This is the subject of today’s discussion.

Thanks for joining us today John.

John: You’re very welcome.

Gerry: John, in your experience, why is proper data management so critical to the success of a tax function?

John: Quality data is the lifeblood of the tax function throughout the tax information lifecycle.

It supports all of tax deliverables, including tax accounting, tax compliance, tax planning and ultimately audit defense.

Where quality and access to data are significant challenges, data management is the priority short-term issue. Investments in people, process and technology all can be undermined by poor data management. Having access to quality information can provide the tax function with opportunities for what we term value targeting. This is where the tax function can focus on minimizing the total tax burden through current and forward tax planning.

Gerry: You mentioned the information lifecycle, what is it and how does it impact the tax function?

John: The information lifecycle goes well beyond the tax function; however, each element has a distinct impact on tax.

The information lifecycle has four phases – create, sustain, analyze and report, and retain and retire. These are fairly self-explanatory but I’ll provide a couple of examples below. It’s our view the information can be “tax sensitized” at various points within the lifecycle. The goal of tax sensitizing is for information that is produced to support an organization’s financial statements to also support the tax deliverables with minimal additional effort.

For example, the 'Create' phase most often relates to data which is created by means of a business transaction usually supported in the electronic systems by an array of ‘master data’ such as account numbers, the business unit, the legal entity, the country code, etc. Master data provides context and clarity and when it’s properly defined it can simplify and help to automate book to tax differences.

'Create' is the most critical phase for tax, because it is the essence of the data quality and impacts how easily information can be extracted from the system. Traditionally, however, tax teams have had little of no input into these processes.

'Analyze and Report' phase is where tax most often interacts with the information lifecycle. What level the data is extracted from can have a significant impact on the quality and amount of manipulation required by tax to the data. For example, is it extracted from the source system, where there is lot’s of detail or from the financial consolidation system where less detail is available? Most organizations already use business intelligence tools, for example, Business Objects or Cognos. However, these rarely are used effectively and they are often not even known by tax function.

Gerry: So John, what are the key challenges and what can tax directors do to improve the quality of data used by the tax function?

John: The primary challenge is that tax functions often see themselves as consumers of data and they must work with whatever data in whatever format. Collection methods are usually manual and the data requires extensive manipulation and validation to meet their needs. This simply requires a lot of time and is frustrating to staff who are already overworked. Tax directors often feel helpless to resolve the situation, but Tax must begin to take an active role in data management.

Gerry: In order to effect better data management for the tax function, what should tax directors do vis-à-vis their colleagues in the company?

John: As I said, Tax must take an active role in data management on a firm-wide level.

This requires connecting with their counterparts in the organization – including IT, finance and business units and getting involved early in technology and data initiatives to give Tax a voice at the table. Data management challenges cannot be solved in a vacuum. We strongly suggest that Tax secure a position on steering committees. For example, if there’s an upgrade or changes to the ERP or a financial consolidation this will provide an excellent opportunity to get involved.

Tax should also consider dedicated resources to these initiatives or supplement their team with third-party resources. If you do not have experience with these initiatives, it is helpful to work with a strategic adviser. It’s too easy to be dismissed or told, “Oh yeah, we’ll provide that.” When you do not understand the system, you are at a disadvantage to challenge that response. It often requires an element of education so that other stakeholders appreciate the value of the proposed changes for tax. Gaining acceptance often is much easier when suggested changes are just incremental to another firm-wide initiative.

Gerry: I suspect that this could be overwhelming for a tax director who is facing many challenges. How do you suggest that tax directors tackle these challenges?

John: That’s a great question. The first thing to do is to establish a plan and take a modular approach to making improvements. The plan should really be written. It should have key initiatives and milestones attached to it. Fundamentally, think of it as a tax technology strategy.

The best place to start is to assess your current state. Ask yourself questions like, “What are the significant challenges that we’re facing?”; “Who are the relevant stakeholders who provide us information or to whom we provide information?”; “Which are the processes that take the most time or represent the most risk?”; “What are the tools that are available?”

Then you want to design a blueprint for your desired future state. Where is it that you want to go?

Focus on the low hanging fruit - small steps with big impact. For example, could you add one or two accounts to the chart of accounts to save time in gathering information, such as meals and entertainment? Do you have access to business intelligence tools which you could begin to use within the tax function?

If you meet resistance, consider “What’s in for them?" For example, finance teams are eager to increase the speed of the year-end close process. We found that most finance teams are receptive to making changes to the way they do things if you can demonstrate that these will result in a faster close and reduce risk for the accounting process.

Gerry: So finally John, what can you and your team at PwC do to assist tax directors with this important data management role?

John: So our team can provide a broad suite of services which we can tailor to meet the specific needs of an organization. Our involvement can range from providing some guidance and insight through hands-on involvement and implementation of a detailed roadmap.

Our Tax ERP and Data Services team is a subset of Tax Function Effectiveness, and the individuals who work in this area specialize in data management projects.

Some of their representative projects include:

  • Tax technology strategy development
  • Tax sensitizing ERP and financial consolidation systems
  • Automation of data collection, workflow and overall document management to support tax accounting and compliance
  • Spreadsheet simplification
  • Requirements gathering and architecting tax-reporting solutions
  • Implementation of data archiving and retention solutions

Our approach encourages looking at data management in a very holistic way. Data management initiatives are going to require changes to both people and processes as well as data. We’re going to bring leading practices that we’ve encountered with other large organizations and most importantly, is that our teams can often bridge the communication divide that can exist within an organization between the various stakeholders.

Gerry: Thank you for sharing your perspectives with us today, John.

For additional information on the use of tax technology to assist in the tax function visit us at

Thank you for tuning into Tax Tracks at

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