Corporate tax technology holds the promise of greater efficiency, insightful data analysis, and better-informed business decisions — but tech implementation itself is often a challenge, according to a new study.
Acritas, a Thomson Reuters company, surveyed more than 300 corporate tax professionals and interviewed nearly two dozen for the recently released 2020 Corporate Tax Departments Survey.
The report covers departmental objectives, challenges, resource levels, skill gaps, use of technology, and use of external advisors. Indeed, one of the themes that emerged from the research: Digital transformation is difficult. Respondents said the selection and implementation of technology is one of the top two challenges they face in the corporate tax department. (Managing regulatory change is the other.)
At the same time, the study shows companies that successfully deploy tax technology deliver a better return-on-investment (ROI) to their organizations. The survey found that corporate tax departments spend an average of 10% of their budgets on technology. However, departments that allocate more than 10% of their department budget to technology spend less overall relative to revenue, which strongly suggests that technology creates greater efficiency and lower overall costs.
Challenges to effective tech deployment
Still, many respondents said their tax technology is under-utilized because their teams lack the skills, training, support, or time to use it effectively. The study found:
- Some tax department personnel are threatened by automation because they fear it will lead to job cuts — “Once they hear ‘robotics’ my team freaks out,” said a tax department leader interviewed for the study. “They panic, start looking for another job, then go ahead and jump ship. They’re very quick to panic, react and just find something else.” Another corporate tax executive added: “One thing I’ve committed to my team is that I will never use technology as a headcount reducer, because that does not encourage people to go out and find technology.”
- When implementing new technologies, companies can become mired in the adoption stage as staff resists and reverts to familiar manual processes — “I’ve found that, from one perspective, I’m having a hard time getting products integrated,” said a corporate tax leader. “I’ve heard other people are having the same issue, but even when we make an improvement, it’s hard to get the users to shift into new changes.” Another echoed this frustration: “I’ll see people that work 100-times harder to bastardize the system, to make it look and work like it did before, rather than if they just changed and did it the right way.”
- The path to progress often runs through IT departments that don’t prioritize tax compliance technology — “Several respondents told us that relations with the company’s IT department were often a problem,” the report states. “IT teams had their own mandates and were less inclined to understand or support the more specialized requirements of the tax team.” One tax leader interviewed for the study said: “In most companies, tax is… off on its own. IT is not focused on tax. IT is focused on the business.”
- It is difficult to find and retain employees with expertise in both tax and technology — The report notes that respondents identified significant gaps in skills on their teams. Indeed, 39% said their team members lacked specific tax-related skills and nearly one-third lacked technological skills. The report notes that this can translate into suspicion and skepticism of the value of the technology itself. “At worst, it’s seen as a threat to individual jobs. At best, it’s viewed as a complicated and complex system compared to traditional pencils, paper, and Excel software.”
Impact of COVID-19
To gauge the impact of the coronavirus pandemic, Acritas conducted a supplemental pulse
survey in March and April 2020, which generated an additional 53 responses. (The original survey and interviews were conducted between October 2019 and January 2020, before the pandemic struck.)
“The COVID-19 survey revealed good and bad signs for greater adoption of technology for tax departments,” the report explains. “Survey respondents cited an increased need to get current technology fully integrated and operational — especially in a remote-working environment. However, new technology projects were likely to be put on hold as teams focus on the immediate pressures of reacting to the changing tax landscape, reducing liabilities, and providing strategic advice to the business.”
Steps to take
The report highlights a number of steps corporate tax departments can take to promote technology adoption in order to deliver true ROI to the business:
- Plan, measure and evaluate — Successful tech implementation is built upon clear objectives, a strategy and resources for reaching them, and rigorous key performance indicators (KPI) to assess progress.
- Communicate — Tax department heads should communicate the strategy to their teams, build support for new ways of working, and be clear about the help team members will receive to develop the skills they need to succeed.
- Reinvent the role — Define, create, and support the role of tax technologist — a professional who combines corporate tax expertise with technology skills.
- Engage — Tax departments with a higher profile within their company, including representation on the leadership team, can better manage expectations and workloads and provide strategic guidance.
- Be patient and control what you can — New tech projects are likely to be postponed due to the COVID-19 crisis, so use the time to ensure existing technology is fully operational and delivering value.
More than half the survey respondents said they feel under-resourced and struggle to keep up with day-to-day pressures — so stepping back to craft a long-term strategy feels like an indulgence.
However, the study concludes that this is precisely what’s needed: “It’s clear from our research that the key to success lies in people as much as technology. There’s a skills gap that is leaving technology under-utilized, and many corporate tax departments are not operating as efficiently as they might. Developing and communicating a clear strategy, bringing in new skills as well as new technology, and measuring the effectiveness of their operations will help corporate tax heads deliver more value to their boards — and greater job satisfaction to their teams.”