Nearly 40% of corporate tax departments lack specific tax-related skills, and 30% lack essential technological skills, according to a new survey.
“There’s a skills gap that is leaving technology under-utilized, and many corporate tax departments are not operating as efficiently as they might,” reports the 2020 Corporate Tax Departments Survey, recently conducted by Acritas, a Thomson Reuters company, and the Thomson Reuters Institute. Acritas interviewed tax department leaders from 23 large, U.S.-based companies and surveyed more than 300 corporate tax professionals for its report on the corporate tax field. Key findings include:
- tax professionals said their top challenges were coping with regulatory changes and implementing new technology;
- more than half described their use of technology as chaotic or reactive; and
- more than half felt their teams were under-resourced.
The study found a link between the skills gaps, resource levels, and challenges tax departments were having implementing and leveraging technology. “We asked respondents about their use of various technologies,” the report says, “and a surprising number noted how much of their technology was under-utilized. In some cases, this was due to an understandable timing issue — they were at an early stage of adoption. But for many, the tax team lacked the skills, training, support, or time to use it properly.”
Meanwhile, workloads increase as international tax regulations continually change and companies move into new markets, undertake mergers and acquisitions, and evolve in other ways that impact tax management. “Then there’s the day-to-day pressures from their board, their management, and their other stakeholders for greater efficiency and effectiveness,” the report notes. “In particular, corporate tax teams face the challenge of rising up from being ‘in the weeds’ as one put it, to deliver more strategic, value-adding service to their colleagues. Efficiency means reducing errors and re-runs, increasing speed and accuracy of reporting, and of course, working with more limited resources.”
Creating the tax technologist
Survey respondents were asked to list their resourcing strategies, and the top choices by far were introducing technology and increasing efficiency. Doing this effectively requires successful change management and personnel with the right skillset — which is difficult to achieve when the necessary skills span tax expertise and technological mastery. “That leads to the question of whether to create a role for a tax technologist,” according to the report. “The major debate here is whether these should be tax experts who learn technology or technologists who learn tax issues. There are convincing arguments for both sides… but overall the majority (81%) believe it is easier to teach technology and analytical skills to tax professionals rather than the other way around.”
You can access the full 2020 Corporate Tax Departments Survey here.
One corporate tax executive interviewed for the study said: “Historically, it’s been much better to have a tax person who is good with technology and can learn. I think it’s a lot (easier) to have a business person become a technology person, rather than a technologist become an accountant.”
Another respondent noted growing interest in the role of tax technologist: “I would say there really wasn’t a career path until eight or nine years ago. It seems to be evolving very rapidly now, so larger companies are going to have people like me who are (proficient in both) tax and technology, and then midsize companies are going to be trying to build that in-house by taking someone who is maybe strong in the area of tax provision.
“They will take people who are strong in working with their tax accounting and provision in technology, and put them into these tax technology roles — because they’ve proven they can understand the financial data and income-tax analysis and technology — and then apply that knowledge to indirect tax and other areas of tax.”
COVID-19 changes the game
To gauge the impact of the coronavirus pandemic on corporate tax department operations, Acritas conducted a supplemental pulse survey in March and April 2020, which generated 53 additional responses. (The original survey and interviews were conducted between October 2019 and January 2020, before the pandemic struck the U.S.)
The deadly virus has impacted departmental priorities, resource levels, and plans for professional development and technology implementation, the new survey found. “The COVID-19 survey revealed good and bad signs for greater adoption of technology for tax departments,” the report observes. “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.”
Many companies have reduced staffing and implemented hiring freezes in response to the economic fallout from the pandemic, which is likely to compound existing resource challenges, skills gaps, and efficiency deficits within tax departments. “Indeed, very few tax departments see talent recruitment as a continuing priority, with only slightly more prioritizing team training,” the report says. “Despite the macro-environment impacting every tax department, it is unlikely to be experienced equally. Those teams who were already stretched thin may find their challenges increased, while those who were already struggling to secure resources for headcount, training, or technology are unlikely to find their business cases improved.”
On the other hand, companies that were already using technology effectively were likely more successful in making the shift to working remotely.
Steps to take
Despite the challenges, the report suggested several steps tax professionals can take today:
- Focus on urgent needs, but don’t abandon the vision — Initiatives to implement technology and augment talent are likely to be a low priority while companies address the threats posed by COVID-19. While you focus on the crisis, however, hold onto the vision of being a proactive tax department with the talent and technology to operate efficiently, reduce risks, and deliver strategic guidance to the business. Lay the groundwork now and be prepared to advance the plan when the opportunity emerges.
- Communicate — Tax department heads should communicate their departments’ 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 necessary technology skills — for your organization.