The tax functions of companies traditionally operate at a hectic pace in the first part of each calendar year, particularly those that have a December 31 year-end. Companies are usually focussed on responsibilities such as financial reporting, ensuring corporate tax liabilities are paid on time and tax return compliance deadlines are met, among others. This year presents an additional complex set of challenges and considerations due to COVID-19.
Now, as more countries impose stringent restrictions on the movement of people to stem the spread of COVID-19, tax functions have had to quickly adapt to maintain their normal responsibilities with tax personnel working remotely. This includes staying current with many tax changes arising from the COVID-19 measures enacted by governments around the world. Tax functions are also having to keep up to date and consider the tax implications of current or potential changes in business models, supply chains and workforce mobility.
What we have learned so far is that COVID-19 will have immediate, and longer term implications for the way that tax functions operate as businesses move from crisis response into the recovery phase.
Many companies are currently focussed on crisis response – planning for business continuity, arranging for employees to work remotely, managing liquidity and making sure that their compliance obligations can be met in these extraordinarily challenging circumstances.
In this mix, mobilising large numbers of tax function employees to work remotely has been the first significant challenge. It will be important to have an appropriate framework in place to manage resources globally and establish collaboration protocols. Some considerations:
1. Infrastructure and equipment. Providing tax function employees with adequate technology, equipment and infrastructure to work remotely is a priority. Practical issues such as whether employees will have enough internet bandwidth will arise.
2. Policies. It is important to consider whether tax staff have been provided guidelines, policies and expectations on how to work remotely. For example:
3. Tax compliance resourcing. As the COVID-19 pandemic continues and economic uncertainty remains, companies may experience resource shortages. Nevertheless, tax compliance requirements still need to be met. Companies actively identifying resource gaps and all the needed tasks to meet regulatory obligations (e.g. financial tax reporting and compliance) will also need to establish a plan to fill those gaps. It is also important to ensure tax risk is continually managed throughout the crisis to maintain proper tax governance and manage current and future tax controversy and change in regulations.
4. Relief measures oversight. Companies may be well-served by establishing a tax committee to help identify and assess the applicable COVID-19 government economic, tax, legal, and relief measures for all countries globally where they have material businesses.
As companies slowly migrate from the crisis response phase into the early stages of recovery, they will need to assess the medium and longer term impact of the crisis on their businesses. There will likely be a focus on managing costs, minimising risk in the future and refining contingency plans to address what didn’t go well during the crisis and how to ensure similar issues don’t arise in future situations.
The pandemic will cause organisations to reassess their tax operating models, improve the efficiency of tax processes, and leverage technology to be more agile. The potential focus on costs will lead to considerations on how to resource the tax function, including outsourcing, managed services or optimising and automating in-house processes to free up time for tax personnel to focus on other activities. Companies should consider establishing a steering committee to review and build on lessons learned, create a roadmap of what to prioritise and implement key actions.