It’s hard to express all the change the world has experienced over the past year. But reflecting back can sometimes provide unexpected clarity and forge the direction of travel for the new year. Here are a few lessons I have learned that may inspire your journey:
My top priority is helping clients achieve their goals and solve their biggest challenges. I do that by spending a significant amount of my time listening to and learning from clients. I’ve spoken with more than 150 clients over the past two months to understand their perspective and what issues keep them up at night.
What I continue to hear is that many businesses find it challenging to prioritize actions given the pace of economic change and other disruption over the past year. To do so, they may need to drill into the details more than ever before to make informed decisions, and Tax is no exception.
A number of forthcoming tax policy events could generate unexpected implications. Most notably, there are proposed global shifts in fundamental tax principles under the OECD’s work on the digitalization of the economy (referred to as ‘BEPS 2.0’). Also of concern are President-elect Biden’s business and individual tax proposals, which may pick up more steam on the final outcome of the US Senate run-off race in Georgia.
Many C-suite leaders are seeking insights from their Tax functions to gain a greater level of understanding of what may be on the horizon through scenario planning, although quantifying the potential impact is not an easy task. Not surprisingly, PwC’s Executive Pulse Survey showed 89% of business leaders plan to perform modeling to quantify the impact of these proposals on their company's cash flow and earnings per share. To drive bottom-line impact, Tax leaders will need to translate the complexity of modeling into bite-sized, actionable communications for C-suite executives.
People and human connections matter most. This year’s events prompted many C-suites to prioritize investment in their people – according to the PwC Executive Pulse Survey, 84% of CHROs plan to ramp up support for well-being and mental health. In addition to core workplace reconfiguration and safety measures, companies now are thinking about enhancing video communication, using AI, and other technological improvements to protect workers.
Many companies are looking to ‘run leaner’ and reset their cost structure. Specifically for Tax, leveraging automation and digitally upskilling talent can produce ‘fit for purpose’ processes that are agile and sustainable over the long haul. A ‘citizen-led’ approach to innovation can empower staff and help shift people hours away from manual tasks to those that more directly support C-suite initiatives.
This year, leaders stress-tested their communication style and approach. I led the almost 11,000 people in our New York Metro office during the early stages of the pandemic and communicated to employees early and often, even when not all of the details and facts were crystal-clear. My goal was to share information and build trust to strengthen our personal connection.
When it comes to tax, enhancing connections between the Tax function and the C-suite, Board, and broader business became a greater priority this year. For example, Tax should proactively communicate upcoming events impacting effective tax rate (ETR) and cash flows – not only for potential legislation but also base-broadening Tax Cuts and Jobs Act (TCJA) provisions that automatically phase in. In addition, Tax needs to be ready to deliver data-driven insights when the C-suite is evaluating operational changes, such as those to the supply chain or workforce.
Tax also has the opportunity to connect with C-suite leaders to align tax strategy with broader company goals. Companies are feeling pressure to publicly disclose their environmental, social, and governance (ESG) contributions, including tax. The growing trend is for the Tax function to lead with a transparency mindset and disclose certain tax data that supports the organization’s story and mission.
The job of a Tax executive has never been more difficult. Shifting tax and reporting obligations, the accelerating pace of business changes, and increased scrutiny from tax authorities are just a few of the challenges on the horizon.
As Tax directors prepare for the coming year, they will be well served by embracing the details, investing in their people, and fostering strong relationships with their C-suite leaders. Their ‘no regret’ actions now will help propel them on the road ahead.