The sands are not only shifting in the external business environment, they are also shifting internally within the tax function and the boardroom. As a result, tax directors have had to rethink how they approach their role, their responsibilities and their capabilities to remain fit for the future.
One area of significant change is the role that tax now plays in the boardroom. According to Egbert Jansen, boards are now obliged to think about tax not only because of the rising potential for reputational risk, but also because of the growing use of criminal procedures and personal liability in many jurisdictions.
Increased boardroom scrutiny will require tax directors to be much more prepared for difficult questions and provide documentation and reports to their boards.
Arjan Dobber suggested that boards may want to consider publishing a tax report within their larger Corporate Social Responsibly Report that articulates what social and economic benefits their tax contributions provide to society.
The job of the tax director is also shifting. Today, according to John Neill, the role requires tax professionals to understand the impact of public perception and risk management requirements on the overall corporate tax strategy. Tax directors must also work closely with the board to understand the risk appetite and the influence that organizational structure has on tax planning.
The panel broadly agreed that – rather than ruthlessly pursuing the lowest possible tax rate – tax directors now need to balance the role of protecting company revenues against that of protecting the company’s image. This noted the panel, required important changes in the way that tax directors operate.
Clearly, the pace of change is also creating new pressures for tax directors. Mr. Neill noted that the pace of regulatory change had increased dramatically, particularly in the financial services industry. Moreover, so too had the timelines being mandated for compliance, meaning that tax directors were now constantly adjusting their systems and processes to meet new regulatory requirements. As Mr. Jansen pointed out, however, the pace of change on all fronts has been so rapid for so many years that – in many cases – it has become the ‘new normal’ for tax directors.
The panel also discussed whether tax planning was still a viable opportunity for tax directors, given the level of public and tax authority scrutiny now being placed on corporate tax. Not dead, noted Mr. Dobber, but certainly much more nuanced. Tax planning now requires tax directors to view their strategies through multiples lenses – social, political, economic and corporate. As a result, new competencies would also become increasingly important to tax directors such as communication skills and the ability to clearly articulate the tax strategy to the public.
This, in turn, will impact the recruitment and development process for tax department employees. Tax directors will want to look for professionals who can manage cultural differences and forge strong relationships with other functions within the business by leveraging communication and people management skills. But they will also have to exhibit a strong sense of integrity and trust, two values that are at the core of the modern tax department.