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A tax technology strategy and tax professional upskilling are critical to leveraging emerging technologies

12 November, 2019

Chris Kontaridis
US Deals, Strategy & Operations Leader for Tax Reporting & Strategy, PwC US
Mark Nadel
Director, PwC US
Nancy Hsieh
Partner, Tax Reporting & Strategy, PwC US

What things are critical for tax functions to successfully leverage emerging technologies? PwC and the Manufacturers Alliance for Productivity and Innovation (MAPI) recently collaborated on a survey to determine just that. Here are a few of our findings.

Tax functions in the manufacturing industry continue to rely heavily on the time-consuming and use of spreadsheets — 53% of survey respondents are spending more than 30% of their time gathering and preparing data for tax provision and compliance purposes. They must consider innovative ways to collect and process financial data, moving away from manual manipulation and reconciliation to performing these activities in an automated manner, which would lead to more time to focus on analytics for real-time decision making.

Tax must develop a technology strategy

Tax functions in manufacturing need to take a longer-term view of their capabilities by developing a tax technology strategy. Such a strategy takes into account the tax function’s desired future processes and organizational value drivers while leveraging existing technologies. Almost three-quarters (74%) of the tax functions surveyed do not have a multi-year tax technology strategy.

Manufacturing tax executives said their top concerns or areas of improvement are the use of tax technology, data automation, data analytics, people, and tax process. They also said the technologies that would improve their work the most include reporting/forecasting tools, data collection, data analytics, and data integration. These executives also said that their tax functions could benefit from small automation tools to bridge the gap of existing enterprise technology solutions and address data challenges.

A tax technology strategy should establish a good future state process and technology roadmap that:

  • Aligns with the organization’s culture, environment, and priorities;
  • Includes a dynamic tax transformation vision that is flexible enough to adapt to changes with tax and business objectives and requirements, as well as systems, data, and technology;
  • Sets forth a multistage future vision of tax technology;
  • Develops an execution plan for immediate and sequential wins, and continuous improvement;
  • Aligns with the organization’s strategy around small automation and location of digital work;
  • Serves as a guide for future decision-making and investment strategies, as well as behaviors and actions; and
  • Incorporates a tax technology governance framework.

There are four key steps to designing and executing a roadmap for addressing tax compliance and reporting obstacles:

  • Inventory data requirements and sources by identifying, rationalizing, and mapping source data (e.g., provision and optimal data sources, data gaps and pain points, process for obtaining additional data);
  • Design data sourcing, extraction, and automation to streamline the data-gathering process (e.g., consider data constraints and unique requirements, leverage current platforms, incorporate self-service ETL and visualization tools, implement data staging and mapping, detect and reconcile anomalies);
  • Automatically connect data flows to integrate solutions (e.g, integrate data sources with tax reform calculation engines, reduce risk associated with manual processes); and
  • Establish a sustainable and nimble governance model (clearly define roles and responsibilities).

Tax professional upskilling is key

Tax professionals must be able to adapt to new technologies and be prepared for challenges in a complex tax environment. They should possess transformative and management expertise and be comfortable with, and even liberated by, disruptive technology and innovation. In addition, they must upskill from a tax technical perspective. Combining these technology and tax technical skills will enable tax professionals to add strategic value to the department and the business.

The ability of tax professionals to navigate robotics, digital labor, and analytics tools will advance their careers, creating new opportunities across enterprise functions. Assisted by advanced decision-making, their use of streamlined processes can create capacity for enhanced analytics and more strategic activities. Technology can facilitate collaboration across geographies, allowing flexibility for digital workers in the workplace.

Implementation of a tax technology strategy and the upskilling of tax professionals likely may result in an increase in the tax function’s operating budget. While the average tax budget has increased over the past few years, the tax function will not realize the full benefits that new technology and automation can bring about without nurturing a culture that embraces and adapts to constant technological changes.