By moving beyond tax compliance and working closely with all parts of the business, tax departments can help their companies avoid missteps, identify opportunities and add greater value. The key is timely awareness of potential events with tax implications.
While the survey reveals that vertical alignment between tax leadership and the board is being achieved, less priority is given to increasing horizontal alignment with other business functions.
When asked where their tax department will devote its time over the next 12 months, tax compliance and financial reporting are the highest ranking. These activities are expected to occupy 20 percent and 19 percent of tax department time respectively. Combined with the amount of time spent managing tax audits (11 percent), these compliance-related activities occupy just over half of tax departments’ time. Other more forward-looking, higher-value activities — such as optimizing the effective tax rate, cash tax planning, tax process improvement and integration with business groups — are expected to take up only about one-third of the tax department’s time.
For tax departments that will be restructuring in the near future, better alignment with the business or finance function structure was the least common reason for the change. Reducing costs and improving controls, efficiencies and risk management were cited more often.
The survey results suggest that tax departments may need to do more to engage directly with a broader range of stakeholders in their businesses to support tax effectiveness of business developments as they happen.
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- 55 percent of respondents have employees with tax responsibilities for business units or divisions.
- 50 percent of employees with business unit responsibilities report to the headquarters tax department.
- 76 percent of tax departments have KPIs for tax return compliance.
- Only 49 percent have KPIs for integration with business groups and early indication of non-routine transactions.