Evolving expectations and organizational growth
Tax transformed series
The role of a tax professional is changing rapidly, along with the role that the tax function plays in the organization. Today, the tax function is expected to contribute to the success of the business and drive growth.
To do so, the focus must be on building trust, transparency and knowledge with the business while delivering on the needs of the board and positioning the tax team as a strategic asset to the business.
Changing expectations, including the requirement of greater certainty, are affecting how a tax department operates. The tax function needs to place more emphasis on forecasting expected earnings and cash flow implications of Canada Revenue Agency (CRA) audit issues through effective tax risk management strategies, careful management of CRA audit queries as well as connection to and awareness of the company’s business activities.
A business plan for the tax department should be developed based on prior and perceived future risk areas, similar to how a business evaluates its operational risk. Tax risk should be considered in risk matrices and presented at audit committees to ensure alignment among the board, executives and the tax department around acceptable tax risk management.
Leaders of tax departments should challenge how they are structured to best support business leaders and their strategic initiatives. For example, reorganizing or aligning with the company leadership in line-of-business areas like business development, marketing and manufacturing, or by jurisdiction. This leads to a clearer understanding of business drivers and risks from inception to execution.
This positions the tax department as a valuable business partner, allows for identification of tax risks and opportunities early in the process and makes it a participant in business and organizational change. To make a smooth transition, the tax function could consider co-locating with the business leaders to provide on-the-ground support.
The tax function will benefit from a strong lens into the business lifecycle and be at the front of what the business is thinking in terms of future plans. This will open opportunities to influence strategy, identify risks, add value as well as make sure there’s effective implementation. Lastly, this insight will make sure accuracy of related tax consequences and reporting.
The tax function is changing from a compliance organization to a value-oriented function.
Only by understanding the business operations, risk and functions, can tax move towards being a strategic asset. Tax professionals need to demonstrate a commitment to learning the business and actively engaging with leaders of that business.
There’s also the need to break through the perception that tax will slow down or hinder the business by actively working towards helping the business grow in a tax compliant and optimized fashion.
It is prudent to formalize and approve a tax risk management policy that governs what types of transactions corporations will engage in and how discussions with CRA and the board will be governed. Having a tax risk management policy provides transparency at the executive level and formalizes the discussions.
By partnering with the C-suite early in the process, the tax function assists in identifying opportunities and risks and to support overall business strategy. The first step is to get insight, followed by knowledge and full business-partner relationship. The C-suite wants no surprises and full transparency.
The tax function needs to continue to be efficient in its compliance functions, but to drive growth, it also needs to be forward focussed.