In looking at what progress has been made in standardization and simplification of tax processes since 2009, we now find that many tax departments are actively working to make their global tax processes and controls more uniform.
The majority of respondents now rate the level of standardization of their tax controls, policies and procedures as “standardized” or “very standardized”. Responsibilities and accountabilities of tax personnel are the most standardized areas. Similarly, more than half of respondents report standardization of tax compliance activities across the annual cycle — from forecasts of tax expense or ETRs and annual provision processes through to compliance and tax return processes. This, of course, leaves a sizeable minority still to reap the benefits of greater standardization. It is also worth noting that respondents say wider tax processes and technologies are the least likely to be standardized.
Only a minority of respondents work in companies that use cloud computing. An even smaller group use the cloud for the storage of accounting or transactional data, which can limit the ability to actively use cloud storage for its potential benefits to the tax department. And only about a quarter of respondents are focusing on cloud computing’s international tax implications.
Another indicator of progress in standardization is the level of investment in tax process improvement and technology. Interestingly, 74 percent of respondents in the current survey report they are satisfied with the levels of investment in tax technology and process improvement. Given that levels of standardization are lowest for tax processes and technologies, and that the majority of time is still spent on compliance and reporting, we would expect less satisfaction with current levels of investment.
Despite the apparent good progress in addressing standardization of tax processes and controls, there are likely to be further areas of opportunity that are not being exploited to their full extent. Taking a proactive approach to reviewing and improving the efficiency and effectiveness of tax processes can produce considerable benefits. Even more gains can stem from engaging with the wider finance function to ensure the accounting processes that tax departments rely on succeed in supporting their needs.
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- In 2009 37 percent of respondents said that finance leadership drives standardization of their tax department, compared to 51 percent in 2012.
- 74 percent of respondents are satisfied with the levels of investment in tax technology and process improvement.
- 62 percent of tax directors say their companies do not use cloud computing.
- 18 percent say their company uses cloud to store accounting or financial data.
- Corporate income tax compliance (which rose from 45 percent in 2009 to 69 percent in 2012) and tax controversy support (which rose from 38 percent to 66 percent) are the most commonly outsourced/co-sourced tax activities.
- The one-third of companies that outsource say that they have significantly increased the scope of work done by third-parties since 2009.
- Among companies who had undertaken global or regional finance transformation initiatives in the past 12 months, the tax department was “integrally involved” less than 40 percent of the time.