• Service: Tax, Global Compliance Management Services
  • Type: Event
  • Date: 5/10/2013

High performing tax functions 

Chris Scott:

So the survey we’ve just conducted – good, better, best, the race to set standards in global tax management – looks at this question of what are the key elements of a high performing tax function. What we’ve found is there’s three key characteristics, if you like, that indicate a tax function is more likely to be high performing. We’ve characterized these around accountability, connectivity and standardization.

So what we mean by accountability is that they’re very clear with their key stakeholders what their responsibilities are, what their KPIs are, and that they report openly on their performance. What we mean by connectivity is that they accept their responsibility to work proactively with their business colleagues to further the business strategy. So they’re not primarily compliance focused, they’re seen as business advisors within their organization. And thirdly, standardization, I call this getting the basics right. What we see is that the high performing tax function has spent some time and invested in making sure that the day-to-day activities that it has to undertake benefit from best practices and processes, if you like, best practices and controls and that they’re leveraging technology to optimize the efficiency of the work that they undertake.

So there’s one area where there’s clearly been improvement from the last time we conducted the survey and that’s around this question of accountability. So if you look across a range of measures what we find is that 20% more responders this time have said their doing the sorts of things that we’d expect to be seeing tax functions doing. So they’re documenting their strategy, their getting input on what that strategy should be from their boards and they’re getting board sign-off on that strategy, for example.

On the connectivity, the picture is pretty much the same as last time. What we find is that tax departments are still very compliance focused. The majority of their time is spent on compliance related activities and the minority of their time on thinking about tax efficiency to the business or supporting the business. So what that tells us is maybe they’re still too compliance focused and not getting out there and being business partners.

On the question of standardization, there is some area of improvement. If we look at the response for implementing global standards and policies, the response rate is greater than last time. But in other areas like the conduct of process improvement projects or technology projects, the amount of time being spent on those areas it’s either much the same as last time or is actually declining. So the interesting question there is why is that? Do people feel they’ve done enough or is it more reflection of the tough economic times and the budgets aren’t there to do the work the tax functions would like to do.

On connectivity, we already see AS-PAC aligned with the other regions. The global picture is quite consistent and actually my experience tells me to expect this and it’s still this issue that tax functions tend to be very compliance focused. That’s where they spend the majority of their time and they’re spending less time than you might expect on those areas where their businesses might see the value add from the tax function come. So proactive business partnering and thinking tax efficiency strategies.

On standardization, we have some interesting results. When we look at how respondents answered the question as to how they rated themselves on levels of standardization, we find AS-PAC giving similar levels of response to the other regions. But when we look at the responses on the numbers of projects and progress around areas that might drive standardization, like process improvements or the implementation of technology, we find that there’s quite a difference in the amount of activity in this region compared with the other regions. So on average in this region across a range of measures, less than 50% of respondents will say they’ve got projects currently in progress. But if you look at the other regions the average is up around the 60% mark so there’s quite a mark difference there, which is interesting given the self-rating is fairly similar.

So I think there’s one key issue that comes out of the survey and that’s that the tax function, wherever you look around the world, continues to be primarily focused on its compliance responsibilities and while that’s undoubtedly very important, it is striking to me that it’s a minority of their time that is spent on the areas where you would see them adding value, whether that’s through proactively supporting their business colleagues or on looking for tax efficiency for the organization. So I think the question remains how can the tax function continue to drive greater efficiency in the compliance process so that it’s freed up to be that value added business partner that the organization wants.

Chris Scott, KPMG’s Head of Global Compliance Management Services, discusses accountability, standardization and connectivity — three key characteristics of high performing tax functions.

 Global Insights

 Regional & national insights


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