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For the member firms of KPMG International, a top priority is helping our clients manage tax transformation and innovation and position their businesses for future success.
Since 2006, we have conducted regular surveys of tax executives around the globe to discover their most pressing issues.
This year, 1,150 heads of tax in 22 countries shared their opinions on how their tax departments are adapting to current business challenges.
CHRISTOPHER SCOTT: We’ve conducted the survey a number of times now, because what we’re interested in looking at is how the tax function is responding to the developing environment in which it has to operate. So we ask questions of companies such as how does the developing business environment or the developing regulatory environment affect the way they organize a tax function and how they go about their day to day activities. So we’ve run this a couple of times now, and I was very interested to see this year’s survey, given recent economic and regulatory developments, to see how much change has been from last time.
Well, I think the good news is that we see much better alignment of the tax function with the stakeholders and their business, so we see very high levels of response where companies confirm that they have, for example, defined a tax strategy that’s aligned with their overall business strategy, that they’ve documented that strategy and that they’ve put in place for its management procedures behind the strategy that help support it, so that’s all very good news, I think.
I think the compliance burden is heavy, and I think it’s increasing. If we look at the survey results, what the companies tell us is that the majority of them do have ongoing controversy activity with the tax authorities, and the majority of them also see the areas of tax controversy on the rise, so tax authorities raising more issues across a wider range of areas, so I think the compliance burden is increasing, and you have to deal with that. There’s no choice there. But I think the other interesting question the survey throws out in this respect is that when you look at the responses to the questions around the size of the budget for the tax function or the levels of investment in better processes or in technology, you find the general level of satisfaction in the tax function, that everything’s okay, and I think the question that gives rise is if you’re not challenging in those areas, how are you going to change the situation where the majority of your time is compliance focused? Because the key to improving the efficiency of compliance is really around this question of process and technology.
We see general levels of satisfaction with current levels of staffing. What we’ve seen since the last survey is what looks like an increasing focus on how the tax function should be structured.
So more respondents this time are saying that they do have a global tax team with clear responsibility for global tax matters.
More respondents this time are reporting that they will have regional teams taking responsibility for regional responsibilities. So we see greater structure there and greater organization, not so much change in the level of staffing, but general satisfaction with those levels, I’d say.
I think the big picture is that authorities are focusing on all areas that you’d imagine, but compared with last time, you are seeing an increase in the number of respondents saying that the tax authority focus increasing in the areas of indirect tax, transfer pricing, which I think you’d expect, but also interesting, an increasing focus on the processes and controls that companies use to manage their tax affairs and increasing interest in how their accounting system, for example, support the management of their compliance obligations, and I think that’s an interesting finding, because we do know there’s a bit of a trend around the world to what’s known as a risk based approach to taxpayer compliance, and they’re getting much more interested in looking at how taxpayers enable themselves to submit correct filings, rather than trying to assess that post-event through the submission of the return itself.
The survey shows us compliance and reporting continues to be a main focus. Companies expect that to take up most of their time, and they also see those areas as their top priorities. There are more projects under consideration this time than last time around the areas of process improvement and technology, so whilst the overall levels are not high, and you’d probably want to see more, they are moving in the right direction, so I think we’ll see some movement in those areas, and I think that will be a response, I think both the regulatory environment, as I mentioned, where tax authorities are more interested in how you go about the business of producing correct filings, but also, I think the pressure from the companies to make sure the tax function is running efficiently and effectively, and that it is adopting best practices in how it goes about its day to day activities.
I think the challenge the survey throws out, which is one that we’ve seen before is that we still see the tax function spending, most of its time and having most of its focus on compliance and reporting, and whilst that’s understandable, you have to get that done, it still begs the question of how could the tax function find more time to undertake its wider responsibilities which add value to the wider business organization?
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