Tax departments in Asia Pacific have advanced since our last survey in 2009. Current results reveal that tax functions in Asia Pacific still devote much of their time to core compliance work at the expense of more strategic, value-adding activities. Asia Pacific tax departments are interacting more with boards and senior executives, but they have yet to fully integrate with the broader enterprise.
Tax governance and board engagement
Survey results show that boards and corporate leadership of Asia Pacific companies are becoming more focused on the management of tax.
However, Asia Pacific companies are less likely than their global counterparts to document their tax department and risk management strategies, which is important for ensuring strategies and policies are followed.
Asia Pacific respondents say that accurate and timely tax return compliance is the most important activity driving tax department objectives, followed closely by accurate and timely financial reporting. These are the most likely activities to have key performance indicators assigned to benchmark and measure tax department performance.
To improve accountability, control and standardized approaches, many Asia Pacific companies have centralized the management and structure of resources in global or business-wide headquarters tax departments.
- 90 percent of respondents in the region say their company has a tax department strategy that is consistent with the company’s overall business strategy, up from 71 percent in 2009.
- 78 percent of respondents report that their board has approved the tax strategy.
- 57 percent of Asia Pacific tax departments have formally documented their tax strategy, compared to 63 percent globally.
- 65 percent have formally documented their company’s approach to managing tax risk, compared to 71 percent globally.
- 71 percent of Asia Pacific respondents say that their tax department is directed, managed or coordinated from their global headquarters.
Driving efficiency – pursuing tax process and control improvements
Survey results show that tax departments of Asia Pacific companies are somewhat less focused on making their global tax processes and controls more uniform than companies in other regions.
While the majority of Asia Pacific respondents rate the levels of standardization of their tax controls, policies and procedures as 'standardized' or 'very standardized', levels of standardization are slightly lower than the global average. Tax controls and responsibilities and accountabilities of tax personnel are the most standardized areas for Asia Pacific respondents, followed by learning, development and career paths for tax personnel.
Further, Asia Pacific companies are less likely than their global peers to be investing in improving their tax department’s processes and controls. Harnessing additional tax technology and process improvement does not seem to be high on the agenda for most Asia Pacific respondents. Three-quarters of them say that the level of investment in technology and tax process improvement in their tax department is 'about right'. With levels of standardization slipping and tax compliance and audit demands rising, we would expect less satisfaction with current levels of investment.
On average, Asia Pacific respondents are less likely than their global peers to use outsourcing and co-sourcing to carry out or support tax department activities. Corporate income tax compliance is the most outsourced tax function among Asia Pacific companies, followed by tax controversy support and tax planning and business support. Improved management and visibility over compliance activities is considered as the most important characteristic guiding decisions over what Asia Pacific tax department activities to outsource, followed by lack of availability of internal resources to complete work and access to compliance technologies.
- 54 percent are conducting overall tax strategy and operational reviews, compared to 62 percent globally.
- 54 percent are providing better training for existing tax staff (61 percent globally).
- 42 percent are undertaking or planning to undertake process-related improvements (61 percent globally).
- 31 percent of Asia Pacific respondents use outsourcing to support tax department activities.
- Australian companies are more likely to outsource tax activities than companies in most countries (42 percent, compared to 34 percent globally), followed closely by companies in India
Promoting connectivity — compliance focus takes precedence
As in other regions, tax departments of Asia Pacific companies put more emphasis on compliance-related activities than they do on improving interaction with other parts of the business. While compliance is crucial, KPMG International’s research shows that connectivity is important for tax departments to achieve their full potential as contributors to business strategy and drivers of value.
In light of rising tax audit scrutiny and controversy in most markets, it seems likely that Asia Pacific tax departments will have to devote even more time to compliance and managing tax audits in the future than they do now. As a result, they could soon have even less time and resources to devote to more strategic pursuits. However, as with companies in other regions, most Asia Pacific respondents appear satisfied with the current situation.
For Asia Pacific companies seeking to derive the most value from their tax departments, this satisfaction with the status quo appears to be misplaced. Without additional investment in tax process improvements and automation, there will be increasing challenges for tax departments as rising tax complexity and pressure to reduce costs continues to mount.
As a result, Asia Pacific tax departments will be constrained in their ability to provide effective, real-time support to business activity and influence the bottom line. As compliance burdens escalate, Asia Pacific tax departments that continue to do business as usual could find themselves falling behind. By investing in additional standardization, process improvement and technology, Asia Pacific companies will be better able to boost efficiency, keep up with compliance and free more time for the value-adding aspects of their role.
- In the next 12 months, Asia Pacific respondents expect financial reporting and tax return compliance to occupy
20 percent and 18 percent of tax department time respectively.
- Managing tax authority audits is expected to occupy 11 percent of tax department time.
- Only 7.95 percent of tax department time is expected to be spent on integration with business groups and early identification of non-routine transactions.
- 80 percent of them Asia Pacific respondents believe their administrative budget is sufficient, and, as noted, most seem satisfied with the level of investment in technology and tax process improvement.
- 13 percent of Asia Pacific respondents expect their tax department structure to change in the near future. The most common reasons for the change are increasing/creating efficiencies
(57 percent) and reducing costs (59 percent). Only 39 percent of Asia Pacific respondents name improving alignment of the tax department with the business or finance function as a reason for the expected change.
View complete global survey results and analysis.
back to top