THE TAX FUNCTION OF THE FUTURE - BUILDING THE BUSINESS CASE FOR CHANGE INTRODUCTION - PWC
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Tax Function of the
Future series
The Tax Function of the Future
October 2016
Building the Business Case for Change
Introduction
Executive summary
Let’s dig deeper
Bringing it all together
Predictions
Let’s talk
Tax Function of
the Future series
Introduction
Introduction
The Tax Function of the Future series The global predictions presented in this series cover six
predicts challenges that Tax functions main topic areas:
Executive summary (“Tax”) may face in the future and
suggests solutions to those challenges. 1. Global legislative and regulatory landscape
Let’s dig deeper Prior papers have presented insights 2. Tax function’s role in risk management and governance
on new legislative and regulatory
Building the business case challenges and the resulting impact on 3. Data flow into the tax function
risk management, discussed the need 4. Technology automation for tax function analytical tasks
Current strategy for Tax to focus on data analytics and to
play an integral role in broader Finance 5. Tax function roles and processes
Tax strategy effectiveness transformation initiatives, and most
6. The tax professional of the future.
recently, highlighted the importance
Tax strategy challenges of enhancing income tax reporting For more information on our predictions for the Tax
processes. Function of the Future, follow the link below to read the
Options for change
previous publications in our series.
Tax must have a clear strategy and
Structure and presentation vision, supported by a well-articulated www.pwc.com/taxfunctionofthefuture
business case, to gain the Leadership
Bringing it all together
support and funding necessary to
implement the solutions we identified
Predictions
in prior papers. This paper focuses on
the process and elements of building a
Let’s talk
successful business case and includes
information gathered from a recent
PwC global client survey.
|1| Previous Next Building the business case for change
Tax Function of
the Future series
Executive summary
Introduction
Never before has Tax needed to influence
its organisation and change its approach
Executive summary as much as it does today. Tax faces a
global macro tax environment that is
Let’s dig deeper fraught with increased regulation and
scrutiny, as well as a heightened focus
Building the business case on which jurisdictions have the right
to tax global income. Also, the media
Current strategy spotlight on tax has resulted in increased
reputational risk, requiring improved
Tax strategy effectiveness understanding, governance, and
oversight of tax matters at senior levels
Tax strategy challenges within an organisation.
Options for change This environment makes it increasingly
important for Tax to secure funds
Structure and presentation necessary to transform its operations
to meet these increasing demands.
Bringing it all together
It is critical that Tax move beyond capabilities, or implement new provision to delivering those benefits within a
departmental funding or trying to ‘find’ or compliance software. It is imperative specified period of time. These benefits
Predictions
the money within its annual operating that Tax present a compelling, integrated, include better cash management,
budget to drive true transformation. and thorough business case that is in line effective tax rate (ETR) reduction,
Let’s talk
Senior executives within the organisation with organisational expectations when alignment with other business areas,
are demanding that Tax develop requesting the organisation’s finite funds legal entity reporting and management,
formal business cases to secure funds to invest in new projects. and strategic input into other key
to participate in other enterprise business areas, such as business
transformation efforts, participate Tax needs to be able to define both
planning, new product/service
in newly defined shared services qualitative and quantitative benefits
development and M&A transactions.
of transformation efforts and commit
|2| Previous Next Building the business case for change
Tax Function of
the Future series
Executive summary
Introduction
Tax is in a unique position to generate benefits to
the organisation; however, these benefits only can
on outcomes and ben
be achieved with a well-articulated business case us efit
Executive summary
that is supported by a clear strategy, roadmap,
Foc s
and execution. The Head of Tax needs to leverage
Let’s dig deeper
erall U
a wider range of skills and approaches. A formal v
p o tegy ke nde
business case can no longer simply be about o y m rs
Building the business case el stra e
qualitative assertions on risk, moving a few hours x
ta v
ta ure
De
as
nd s
Current strategy out of a process, or making employees’ lives easier. Technology
Tax transformation must be integrated with the
Tax strategy effectiveness overall business and have a robust and critical
approach to the cost/benefit analysis of the choices Execution
Tax strategy challenges Building
available. of business
Data a business People
case, benefits
delivered and
case for
Options for change measured
change
The cost/benefit analysis must be comprehensive,
Structure and presentation anchored to the strategy, and reflect the whole
ti o te
business context. Process and
op lu a
ns
oganisation
Bringing it all together
a
Ev
A Tax organisation looking to build a transformation
Predictions Ef
business case must develop an overall tax strategy, c o m f e c t i ve l y
identify key measures of its future performance, mun
i c a te
Let’s talk
understand the choices it faces to transform
from where it is now to where it needs to be, and
M oni
effectively communicate an overall roadmap to r a n d r e p o r t
that takes a holistic approach in defining the
transformation. These key elements are represented
in the following diagram:
|3| Previous Next Building the business case for change
Tax Function of
the Future series
Let’s dig deeper: Considering Tax’s current strategy
Introduction
A successful Tax function needs to Such a strategy should address these key corporate strategy, such an approach
identify its objectives and be able to aspects: presumably would be reflected to some
Executive summary measure how well it is accomplishing degree in its tax strategy; if not, there
them. The starting point for the Head Stakeholders should be a clear understanding of the
Let’s dig deeper of Tax in preparing a business case for possible consequences of the mismatch.
Key internal stakeholders include senior
change is to review the fundamental
management and relevant functional “Senior management is increasingly
Building the business case pillars of its current tax strategy.
areas within the organisation including focused on how tax risk is being
What we mean by strategy is how the
Finance, Supply Chain and Operations. managed and how that aligns with
Current strategy organisation manages its tax affairs and
External stakeholders include the overall goals of the organisation.
responsibilities with a clear view of its
Tax strategy effectiveness shareholders (represented by the Board Risk appetite can no longer be set
key stakeholders’ concerns, and what it is
of Directors), and others such as tax in isolation from the wider business
expected to deliver.
Tax strategy challenges authorities, non-executive directors, due to the potential for unexpected
regulators, and customers. Public views tax errors, exposures, or even
70% of companies surveyed are becoming increasingly important
Options for change reputational damage.” - Breaking
have a tax strategy. Of these, and may need to be considered and away: How leading finance functions
Structure and presentation 58% have had senior level sign- prioritised.
Survey are redefining excellence , a 2015 PwC
off and 74% were introduced
Finance Effectiveness paper based
Bringing it all together in the last five years. The consideration of stakeholders
on benchmark engagements across a
should address the alignment of the
broad range of industries and finance
Predictions organisation’s overall corporate strategy
activities.
with its tax position and behaviors. For
Let’s talk example, if a business places customers
and community at the centre of its
ax alignment with overall business goals and objectives and
T
integration with Finance and other functions, particularly assessment
of risk and governance, are key to driving and sustaining value while
creating a successful tax organisation.
—A
lex Peng, Emerson Electric
|4| Previous Next Building the business case for changeTax Function of
the Future series
Let’s dig deeper: Considering Tax’s current strategy
Introduction
Tax cost and tax risk Approach and responsibility clear agreed upon strategy
A
Stakeholders’ objectives with respect Who within the organisation is is vital for any organisation
Executive summary to Tax focus primarily on how much responsible for developing and in the current environment.
tax is paid and the level of tax risk delivering the tax strategy? Is it entirely It brings organisational
Let’s dig deeper accepted within the organisation. Full the responsibility of the Tax function,
clarity, a touchstone for
compliance with the law is required for or are responsibilities shared with
Building the business case all organisations, but beyond that, the other functions? What key performance decision making and a clear
question is: What is the right balance indicators will measure and drive the destination for leading the
Current strategy
in managing tax costs and risks? If the accomplishment of Tax’s goals? Tax team.
objective is to reduce taxes, how much
Tax strategy effectiveness Having developed a clear strategy, it is —H
ead of Tax
risk is the organisation prepared to take
important for Tax to assess how well it is
Tax strategy challenges
in doing so? What degree of confidence
currently delivering on this strategy and
will it seek from practitioner opinions?
consider its options for developing the
Options for change Will it always litigate disputes? What
business case for change.
is its tolerance for negative publicity?
Structure and presentation How will it behave with respect to
choices in the law, or where there are
Bringing it all together grey areas or other ambiguities? Are
there specific tax concerns driven by
Predictions jurisdiction or industry?
Let’s talk
|5| Previous Next Building the business case for changeTax Function of
the Future series
Let’s dig deeper: Evaluate effectiveness of strategy delivery
Introduction
The effective delivery of the or key performance indicators (KPIs) KPIs are developing but are
organisation’s tax strategy likely will established for Tax. Tax leadership often currently quite immature, and
Executive summary require that the Head of Tax consider drives the framing and negotiation of tend to be around ETRs, customer
whether: these KPIs with key internal stakeholders. satisfaction (feedback from other
Let’s dig deeper • Taxes are managed appropriately.
Tip business units), and submitting
KPIs returns on time. Looking forward,
Building the business case • Tax risk is within set parameters. companies should align tax KPIs
Setting the right KPIs to reflect the
with the overall corporate KPIs. A
• Tax is operating efficiently and strategy allows Tax to understand gaps
Current strategy key reason Tax is struggling with
effectively and in full collaboration between current and desired states and
a business case for change is the
Tax strategy effectiveness with other internal teams. identify the requisite focus areas for the
lack of KPIs/targets, and in turn
business case.
Success for each of these factors will a lack of ability to demonstrate
Tax strategy challenges their value added to the business.
need to be defined within the context Some KPIs might be viewed as more
of the organisation’s tax strategy and traditional, and consequently more
Options for change
hence be considered based on goals familiar, to Tax teams and management.
Structure and presentation
There also are different and less
traditional ways to measure risk and
The top three most performance. Both methods are crucial to
Bringing it all together
important measures of reflecting the breadth of factors behind
performance of the Tax an effective realisation of strategy.
Predictions Survey
function, based upon survey
response are:
Let’s talk
1. tax risk management,
2.management of the effective
tax rate (ETR) to reduce ETR,
and
3. management of the ETR to
ensure a sustainable long-term
ETR.
|6| Previous Next Building the business case for changeTax Function of
the Future series
Let’s dig deeper: Evaluate effectiveness of strategy delivery
Introduction
Traditional tax effectiveness Non-traditional tax KPIs include:
measures include: A reduction in the ETR is
• job satisfaction/recognition
second after risk management
Executive summary • measures of actual and forecast ETR, measures,
in the ranking of KPIs by
Survey
• magnitude of the return-to-provision • measures of the effectiveness of importance.
Let’s dig deeper Tax department process or quality
adjustment,
Building the business case
improvements, and
• time spent on and resources
dedicated to compliance activities, • measures of Tax’s leadership profile While hard reductions in ETR may no
Current strategy within the organisation. longer be the most important measure
• financial statement impact of tax risk of success, there are factors that drive
Tax strategy effectiveness and exposure, For each KPI identified, the Tax function the rate that can be appropriate KPIs,
should set specific targets that are such as implementing effective processes
• measures of accuracy and timeliness
Tax strategy challenges appropriate to the strategy and the for timely and complete claiming of
of compliance filings,
internal and external challenges that the research and development tax credits.
Options for change • tax prepayments as a percentage of organisation typically faces. Is the organisation’s ETR higher than
income tax return liability, and is standard for its industry, and, if so,
Structure and presentation Below are examples of traditional and
• tax savings generated as a percentage why? Can the Tax function or the wider
non-traditional KPIs that might be
of total revenue. organisation influence factors that affect
Bringing it all together considered in the context of Tax’s three
the ETR? The consideration of KPIs
strategic focus areas:
Predictions
should go beyond corporate income tax
I believe that staff to all key taxes borne by the organisation.
Let’s talk engagement scores should be 1. Are taxes managed
given a higher priority. appropriately?
The ability to manage taxes and cash ax risk management has
T
—G
lobal survey payments while identifying tax savings
become more in focus than
opportunities historically has been a goal
of many Tax organisations. Which KPIs reducing or optimising the
should the Tax function use to measure tax burden.
success in this area? —G
lobal survey
|7| Previous Next Building the business case for changeTax Function of
the Future series
Let’s dig deeper: Evaluate effectiveness of strategy delivery
Introduction
A Tax function seeking to manage tax risk needs to understand its organisation’s tax risk profile.
Risks
Executive summary
We capture and analyse All tax processes and
All our tax returns are Tax costs and
everything that does or requirements are fully
Let’s dig deeper complete, correct, tax consequences of all Managing risk
might impact our tax embedded in our
paid and returns filed our activity is correctly
position: structural operations and kept
on time.
and reputation
reflected.
Building the business case product or external. current.
Current strategy Reputation
Tax strategy effectiveness
Tax strategy challenges
Options for change 2. Are the tax risk parameters • Whether the ‘owner’ of the risk is These factors flow into the setting of
set? clear and appropriate. KPIs as the risk assessment will identify
Structure and presentation whether there is excessive risk or failure
Managing risk is a key objective of Tax • The individual or function responsible
of control in certain areas, such as
strategy and has traditionally been an for managing risks (Are there gaps
Bringing it all together
important tax effectiveness measure. or weaknesses in the management of miscoded expenses, the size and extent
these risks?). of return to provision adjustments, levels
Predictions In fact, the PwC global survey shows of late filing or error penalties, and the
evidence of KPIs being focused on • The extent to which Tax is adaptable number of resubmitted tax returns.
Let’s talk increasing organisational value through and able to shift its focus in a dynamic
tax risk control. environment.
A current risk analysis should consider: • The adequacy of tax risk management
monitoring and reporting.
• Whether there is a clear
understanding of the risks for all of
the organisation’s taxes.
|8| Previous Next Building the business case for changeTax Function of
the Future series
Let’s dig deeper: Evaluate effectiveness of strategy delivery
PwC prediction 3. Is Tax operating in the most and resource consequences of a location
Introduction
efficient and effective way strategy. For example, a high number of
Risk small geographically diverse teams may
Executive summary & Governance possible?
result in more hierarchy, task repetition,
Tax must achieve its objectives and
Let’s dig deeper • Many jurisdictions will and inefficiency in communication, all of
deliver its strategy in an efficient and
legislatively require the adoption which can be measured.
of a tax control framework effective manner. Its KPIs should assess
Building the business case
which follows guidelines whether its people, processes, and A particular area to consider is career
Current strategy similar to Sarbanes-Oxley systems are working well together, opportunity for tax staff. A more
and COSO (Committee of effectively consuming the appropriate challenging business environment can
Tax strategy effectiveness Sponsoring Organisations of the amount of resources. mean that the ability to promote staff
Treadway Commission). within Tax is reduced. Focus on measures
Tax strategy challenges Job satisfaction and of development, increases in the range
• Enhanced stakeholder scrutiny of experience, recognition, and staff
recognition measures
and reputational risk will force
Options for change rotation inside and outside of Tax can be
companies to continuously re- KPIs that address the people component
key to influencing staff retention.
evaluate their tax decisions. of the Tax function also are important
Structure and presentation
in developing a holistic strategy for
• Strategic focus on jurisdictional Measures of the effectiveness
Bringing it all together Tax. Measures of the tax professional’s
reporting and documentation of Tax department process
workload, skill sets (technical and
of business activities, including or quality improvements
Predictions transfer pricing, will be critical leadership), responsibilities, location,
to managing the increased tax work-life balance, and overall job Is Tax making the best use of internal
Let’s talk controversy resulting from satisfaction can be important as they or external technology to access data or
transparency initiatives. are critical to attracting and retaining perform some required tax activities?
the people needed to deliver on Tax’s Tax should consider whether its current
goals and objectives. For instance, are
senior people spending time on less
skilled work due to resource constraints 54% of respondents believe
or a low degree of automation resulting that it is more expensive to
in too much time being spent on data outsource and 20% do not feel
Survey
analysis rather than tax technical work it manages their risk as well.
or business planning? There may be time
|9| Previous Next Building the business case for changeTax Function of
the Future series
Let’s dig deeper: Evaluate effectiveness of strategy delivery
Introduction processes are the most efficient and Are strategies to reduce overall tax
fit for its immediate purpose. Tax operational cost being implemented Over 50% of middle
also should consider measures of in the most effective way? The move management and nearly 30%
Executive summary
frequency of process and technology toward shared services, Tax centres of of leadership time is spent on
Survey
enhancements. The Tax function’s excellence, or outsourcing of compliance compliance, reporting, and
Let’s dig deeper
effectiveness can be improved by have the potential to streamline control activities.
Building the business case automation of tax accounting and operations and reduce overall cost. Such
compliance activities; enhancements to strategies should, however, be balanced asset. Thus, KPIs may need to address
Current strategy document management, workflow, and against other considerations such as Tax’s ability to influence and impact
collaboration between Tax and Finance; risk (reputational and financial) and positive change across the organisation.
Tax strategy effectiveness
availability of tax-sensitised financial efficiency. For example, how often and in what
data; and shifting business models. format is Tax reaching out to the business
Tax strategy challenges Measures used to monitor the impact
– educating, supporting, presenting
of change could include time spent
Options for change Do you have any its initiatives, and collaborating with
on certain activities or processes, the
observations about what leadership across functions? Who is Tax
adherence to deadlines, the number
Structure and presentation makes outsourcing more or influencing within the organisation?
less successful? of hand-offs or interactions with other
Survey Objective measures can include the
teams.
Bringing it all together
“Historically, there have frequency of participation on business
been too many different or risk committees, levels of attendance
Predictions Measures of Tax’s leadership profile at tax training sessions for the business
providers of tax services across
the countries in which we In this shifting global environment, it is and participation in cross-functional
Let’s talk
operate. We are seeking to important that Tax is viewed not only organisation initiatives. Subjective
rationalise that because we see as a critical compliance function, but measures may include internal
no real cost/benefits and the as a valuable strategic organisational customers’ feedback.
risk: reward trade-off is not
working.”
PIs should reflect the values of the company, bringing into balance
K
the effective management of the ETR and its cash impact together
with the sustainability and social aspects of tax being a contribution
to the treasury.
—G
lobal survey
| 10 | Previous Next Building the business case for changeTax Function of
the Future series
Let’s dig deeper: Challenges to effective delivery of the tax
strategy
Once Tax has considered its strategy and Tax historically may have operated in technology as well as managing process
Introduction
evaluated the effectiveness of its delivery a silo without much collaboration with improvement projects to meet ongoing
by identifying gaps between target KPIs other functions. Similarly, it may be demands. Tax resources with diverse
Executive summary
and correct performance, it is critical to conservative in its approach and prefer tax technical, technology, project
understand the internal and external to maintain the status quo. Additional management, and business acumen are
Let’s dig deeper
challenges that the function and the challenges may exist because of an uncommon; as such, risk of inaccuracy
Building the business case organisation will face when considering organisation’s structure, the Head of and damage to the organisation’s
potential solutions for the business case. Tax’s perceived status, and whether Tax reputation is likely to increase if Tax
Current strategy can get the attention of and influence is unable to respond appropriately to
Internal financial pressures could present C-Suite decision makers. external pressure.
Tax strategy effectiveness a significant hurdle if an organisation is
not able to secure the necessary funding External challenges to Tax’s strategy
Tax strategy challenges for its tax strategy. In addition, there are are becoming more evident with global
challenges with respect to navigating pressure for transparency and increases
Options for change the existing technology landscape and in reporting and levels of taxes. The
understanding ‘the art of the possible’ Tax function is being pushed to provide
Structure and presentation with respect to internal or external information typically not readily
technology solutions that are viable available to Tax. Tax professionals are
Bringing it all together
for Tax. required to be proficient in using new
Predictions
Let’s talk usiness is measured pre-tax, therefore, the effectiveness of the tax
B
function is often disregarded when considering the value that we add.
—G
lobal survey
| 11 | Previous Next Building the business case for changeTax Function of
the Future series
Let’s dig deeper: Assessing options for change
Tax strategy
With high-level goals and target KPIs established, and vision
Introduction
and with awareness of existing performance gaps
Guiding principles
Executive summary and challenges to effective change, Tax can turn
its attention to developing a plan that addresses Governance
Let’s dig deeper current gaps using a target operating model
framework. Service
Building the business case
Running internal workshops may be
Current strategy helpful in determining the right KPIs,
understanding the challenges that
Tax strategy effectiveness Tax faces, and assessing the impact
Tip of changes to the target operating
Tax strategy challenges model. These internal workshops can
be successful when they include cross-
Options for change People Process Data
functional input from team members
at all levels in the organisation.
Structure and presentation
Bringing it all together Developing the target operating model
In order for Tax to understand how it can best
Predictions deliver the organisation’s tax strategy and its
Technology platform
options for closing the gaps between its current
Let’s talk and desired states, it needs to develop its ‘target Organisation
operating model.’ This requires Tax to consider
various moving parts to see how they impact Performance management metrics
each other and can be changed. These ‘moving
parts’ are Tax’s organisation, technology, people,
process, and data. Any plan for each element
needs to be coherent, transparent, and explicit he real challenge is being able to look forward five years and
T
– relating back to how it assists in delivering consider what a Tax function should look like and evaluate
the Tax function strategy and supporting the what that now means for outsourcing, technology and people.
business case.
—H
ead of Tax, financial services
| 12 | Previous Next Building the business case for changeTax Function of
the Future series
Let’s dig deeper: Assessing options for change
Introduction
In developing the target operating model, Tax should determine its specific areas of focus for enhancements
needed to achieve its objectives and successfully deliver on KPIs. PwC’s predictions for the Tax function of the
Executive summary future relating to technology, people, process/organisation, and data include the following:
Let’s dig deeper PwC prediction Technology-driven disruption, as well Tax may be less advanced with
as the ever-increasing volume of data their use of technology than
Building the business case Technology required for Tax, are already having a other functions. Tax should
Current strategy major impact on companies and will collaborate with other functions
• More companies will use their
enterprise-wide financial systems
continue to do so for the foreseeable Tip to leverage their use of technology
Tax strategy effectiveness future. and engage with IT to share its
to prepare tax calculations (e.g.,
objectives regarding technology
income tax accounting and
Tax strategy challenges
indirect taxes), thereby replacing initiatives. Both functions
Organisations believe they are
spreadsheets and/or traditional likely would find that there are
Options for change somewhat behind their peers
tax technology solutions. intersections in their goals and
and where they want to be in
Survey objectives.
Structure and presentation • The vast majority of Tax effectively using technology
organisations will rely on to reduce risk and increase
Bringing it all together professional data analysis tools efficiency.
to assist in the decision-making
Predictions process in areas such as detection
of risk, opportunity identification, Companies with a full or
Let’s talk projections and scenario partial tax technology
planning, and overall business strategy/roadmap spend less Excel still remains the most
Survey
support. time on tax return preparation widely used technology with
and more on transfer pricing, respect to the both corporate
offering business support and Survey
direct and indirect tax.
dealing with tax changes (e.g.
country-by-country reporting)
and tax and business strategy.
| 13 | Previous Next Building the business case for changeTax Function of
the Future series
Let’s dig deeper: Assessing options for change
PwC prediction Tax teams require the skills to navigate an environment that is increasingly
Introduction
technology-enabled. The data skills needed are less about gathering and
People manipulating data and more about the analytics for making important decisions.
Executive summary
Tax technical skills alone are no longer sufficient; tax professionals also require
• A successful tax professional of project management and the interpersonal skills to manage process improvement
Let’s dig deeper the future will be highly proficient
projects across functions and act as effective business partners and members of the
in data analysis, statistics, and
Building the business case overall team.
technology, as well as process
improvement and change
Current strategy
management. Across all global survey respondents, the following skills are considered
Tax strategy effectiveness • Tax will employ dedicated tax IT, most scarce in the market: technology & data management (28%), tax
data and project management technical (19%), communication & process / risk / control understanding
Survey
Tax strategy challenges specialists who will develop, (each 16%).
champion, and execute the tax
Options for change technology and transformation The following skill attributes are ranked highest of what tax professionals
strategies. must have and will need more of within the next five years: process / risk /
Structure and presentation
control understanding (70%), technology (67%), communication (60%),
Bringing it all together project management (51), and tax technical (50%).
Predictions
Let’s talk
| 14 | Previous Next Building the business case for changeTax Function of
the Future series
Let’s dig deeper: Assessing options for change
PwC prediction Tax is undertaking initiatives to
Introduction With respect to clear and
standardise and streamline operations,
Process/ leveraging models that typically have coherent tax processes that
Executive summary Organisation been deployed by Finance and other operate efficiently, Tax
Survey
functions. Increasingly, shared service organisations believe they may
Let’s dig deeper
• Most global tax preparatory models are being used to take on certain be just below level compared
Building the business case compliance and reporting routine and data collection tasks within to their peers and their desired
activities, including data Tax. A shared services resource model level.
collection and reconciliations,
Current strategy or co-sourcing/outsourcing can result
will be performed within the
in direct cost savings. In addition, by
Tax strategy effectiveness
company’s shared service centre
or will be co-sourced with a third shifting responsibilities within tax
party. processes, more time can be focused on
Tax strategy challenges strategic analyses.
• Tax will use real-time
Options for change collaboration tools to automate These process enhancements may be
their workflow, document large-scale organisational changes or
Structure and presentation management, calendaring, and smaller tax process enhancements aimed
internal controls. at reducing cost and enhancing efficiency
Bringing it all together
and effectiveness.
Predictions
Let’s talk
| 15 | Previous Next Building the business case for changeTax Function of
the Future series
Let’s dig deeper: Assessing options for change
PwC prediction How data issues are solved will shape For technology
Introduction
process change, which in turn will drive transformation...
Data the resource model and the opportunities “start with data needed to
Executive summary
for value-added activities that contribute support the overall tax strategy,
Let’s dig deeper • The majority of Tax organisations
more strategically to the business. Tip then design processes around
the data that you have available
Building the business case
will receive all information in a along with a plan to address the
‘tax-ready format’ from either Are Tax and stakeholders
gaps and then look to people.”
their enterprise-wide financial receiving the outputs needed
Current strategy
systems or a dedicated tax data timely and in the format
Survey
Tax strategy effectiveness
hub. needed?
• Dedicated tax data hubs will Under half (48%) of survey
Tax strategy challenges become mainstream and be respondents said they receive
developed internally, licensed data in a largely (33%) or
Options for change from a third-party vendor, fully (15%) tax sensitised/
and/or accessed through an analysed format.
Structure and presentation accounting firm as part of co-
sourcing arrangement.
Bringing it all together
• Data security will be high on
Predictions Tax’s agenda due to concerns
over confidential information
Let’s talk being inadvertently released or
shared publicly.
| 16 | Previous Next Building the business case for changeTax Function of
the Future series
Let’s dig deeper: Assessing options for change
Introduction The cost/benefit analysis
Having evaluated performance gaps Cost/benefit calculation example:
Executive summary and challenges and assessed potential
options using the target operating model Year 1: The Tax Director of a FTSE 100 company engages a professional
services provider to gather data needed to support the calculation of research
Let’s dig deeper framework, Tax needs to perform an
& development (R&D) tax credits. The cost of professional services in the first
analysis of cost versus benefit in selecting year was £450,000 with credits generated in the amount of £3,000,000.
Building the business case
the solutions assessed.
Year 2: The Tax Director considers undertaking a project to tax-sensitise the
Current strategy If a business case is going to have any Company’s source data to more easily identify and accumulate R&D expenses.
chance of being successful, it needs A business case is developed to justify the implementation of a solution.
Tax strategy effectiveness to clearly explain why the strategy is
The cost of ERP /Technology consulting services is £550,000 and as a result
worth the investment from a business of automation and enhanced quality of data, the Company projects that R&D
Tax strategy challenges
perspective. The cost/benefit analysis credits would amount to £3,750,000 in Year 2.
requires thought and very careful
Options for change Having evaluated future qualifying R&D activity and with an automated solution
analysis. What options provide the
and improved processes in place, the Tax Director expects the Company to
‘biggest bang for the buck?’ Although
Structure and presentation generate £3,500,000 in R&D credits for the following three years.
it may be straightforward to associate
Bringing it all together a financial cost and benefit to each
targeted area for change, assessment of
Over a 5 year period:
Predictions non-financial costs and benefits also is
critical to the overall picture and case for
Total Corporate Tax benefit (£17,250,000 x 35%) = £6,038,000
Let’s talk change. This is not an assessment that
Tax can make on its own. Less: Total costs incurred = £1,000,000
Net tax benefit for the business case £5,038,000
| 17 | Previous Next Building the business case for changeTax Function of
the Future series
Let’s dig deeper: Assessing options for change
Introduction
Measurable areas of cost savings that In addition, non-financial benefits An example of tax transformation benefits
some companies have seen include: impacting the broader business
Executive summary • driving better cash management; include:
• enhanced collaboration with external 34% Sample ROI for a
larger multi-national
• reduction in ETR;
Let’s dig deeper stakeholders; organisation
• elimination of hours to perform
Building the business case certain compliance requirements; • alignment with overall enterprise or
finance transformation efforts that
Current strategy • lower staff cost to perform leverage technology investments,
preparatory tasks (e.g., shared service new resource models such as shared 16 Reduction in Tax FTE’s
to a Centre of Excellence
Tax strategy effectiveness centre or co-sourcing with a third- services and elimination of redundant (CoE) model
party vendor); costs;
Tax strategy challenges
• increased capacity by staff to • strategic input into other key business
perform more analytics and partner areas such as new product/service
Options for change
with business in providing a Annual direct cost savings
comprehensive review;
development, and M&A; £2M expected for the Tax
Structure and presentation department as a result
• better engagement and control of
• ability to cross train, hire, and retain transformation
Bringing it all together key staff, provide career progression, risk leading to lower ‘risk’ ratings
and reduce staff augmentation costs; (depending upon the country) - this
Predictions ultimately could result in reduced
• elimination of software costs or other
Let’s talk
recurring expenses;
audit or investigation risk and lower
penalty and interest costs;
47% Recommended reduction
in quantity of adjustments
• decreased risk of penalties; and • more certainty with respect to tax
• improved legal entity rationalisation, positions; and
reporting and management. • higher levels of employee
engagement.
| 18 | Previous Next Building the business case for changeTax Function of
the Future series
Let’s dig deeper: Assessing options for change
Introduction The roadmap for change The roadmap provides an organised
approach that allows the business to
A key aspect of developing the business manage phases of the strategy over
Executive summary
case for change is the establishment time. This approach also allows the
of a timeline with key milestones. Tax business to plan and address budget
Let’s dig deeper
should articulate the solutions needed, needs for future years and work with
Building the business case how and when these changes would be other internal functions to assess the
implemented, and the key interactions consequences of the change on the
Current strategy required with other areas of the wider organisation.
organisation.
Tax strategy effectiveness Another important aspect of the
The biggest mistake Tax will roadmap is the ability to align with
Tax strategy challenges make in performing cost/ organisation changes as they occur
benefit analysis is using how across functions. For instance, if a
Options for change
it currently delivers against its Finance transformation is planned for
a certain time period, Tax’s activities
Structure and presentation
Tip baseline. Instead, Tax should use
should be coordinated so that there
the anticipated cost of delivering
what the business expects as its is mutual benefit. Structuring the
Bringing it all together
baseline, and then looking at roadmap to coordinate with other key
how costs could be reduced or business initiatives with Tax impact is
Predictions
efficiencies gained. important in supporting the business
case.
Let’s talk
| 19 | Previous Next Building the business case for changeTax Function of
the Future series
Let’s dig deeper: Assessing options for change
Introduction Roadmap Example:
• An end state vision is the target under which all transformation roadmap activity is set. It describes how the tax function
Executive summary should look in the future. It also considers the people, process, technology and data required to make it happen. Finally, it
takes into account existing skills, technology and change programs in Finance, IT and Risk functions.
Let’s dig deeper
Tax transformation - example of 5 year roadmap
Building the business case
2016 2017/2018 2019/2020 Benefits Business case
ASSESS TRANSFORM
Current strategy
Extend to other • Global oversight and Cost can be part of global
Collaborative PwC online Extend for in-house processes e.g. financial visbility partner contract.
Tax strategy effectiveness tools collaboration tools entities statements, budgeting • Concentrate effort where
and forecasting it is most needed Without this oversight, local tax
authority audit costs will rise.
Tax strategy challenges ASSESS TRANSFORM ASSESS
Savings per year from single
Tax Transition to single Standardise data global partner.
Assess analytics • Concentrate on value
Options for change compliance
global provider collection, automate
opportunities delivery to business
simplest entities Meet risk management, control
and transparency expectations.
Structure and presentation ASSESS TRANSFORM ASSESS
Transition to single • Global oversight and Cost can be part of global
Built-in data analytics Assess software
Bringing it all together Indirect global provider, data
and testing applied options to bring
visibility partner contract.
taxes filings transformation for in-house • Concentrate effort where
across all returns it is most needed Without this oversight, local tax
global outsourcing
authority audit costs will rise.
Predictions
ASSESS TRANSFORM ASSESS
Assess vendor • Tactical improvements Save time and cost by process
Let’s talk Tax Outsource local Assess incremental solutions, assess and technology improvement.
preparation, automate improvement automation from • Target finance programs
provision consolidation for ‘tax-ready’ data Plan now to mitigate risk of
accounts
compliance failure and audits.
ASSESS TRANSFORM
Re-evaluate tax analytics • Uncover significant cash Identify significant savings
Indentify best savings potentially hidden in data.
Analytics Assess tax analysis apps available and
cost/benefit case and
offerings extend uses e.g. tax • Value created exceeds
pilot e.g. Tableau Mirror tax authority approach or
depreciation cost of function
risk being left behind.
ASSESS TRANSFORM
Leverage existing tools • Understand true CbCR Avoid wasted time by thoroughly
Transfer pricing CbCR data analytics to deliver CbCR Assess cost vs benefit impact assessing the requirements.
(pilot process and document global TP of TP transition
and CbCR assess impact)
• Insight into tax authority
Plan now to mitigate risk of
process reaction
compliance failure and audits.
| 20 | Previous Next Building the business case for changeTax Function of
the Future series
Let’s dig deeper: Structuring and presenting the business
case for change
Introduction The structure
With a clear strategy and areas of focus identified for change, Tax is ready to build the business case to secure the buy-in and
Executive summary funding for the change. An effective business case should include the following components:
Let’s dig deeper
1. Project overview 3. Project outputs and 6. Stakeholders and responsibilities
Building the business case • A summary of the existing landscape, business outcome • Definition of the roles and responsibilities for
including the general business context • Description of the project in more detail, the the ownership and delivery of all aspects of
(and transformation events), the timing of costs and targets for the benefits, the business case.
Current strategy
organisational tax position, the challenges, and the measures used and how they will • Identification of the business sponsor
and how they intersect. be generated. This should draw out the responsible for delivery of the primary
Tax strategy effectiveness • An outline of the proposed initiative, the differences between the financial and the objectives; the project manager responsible
objectives, and how Tax meets them. non-financial aspects of the project. for the successful delivery of the project; and
Tax strategy challenges • Ownership and accountability for delivery. the key internal and external stakeholders
(including their priorities).
• Major constraints on the project.
Options for change
2. Strategic objectives and • Details of any major contracts or agreements
critical success factors with third parties – with a status of ongoing
Structure and presentation negotiation. 7. Dependencies
• An overview of the organisation’s overall • Impact on the rest of the business and other
strategy, its tax strategy, and how its tax teams and the interaction with other key
Bringing it all together strategy is supported by the proposals for organisation projects and initiatives.
change. 4. Project strategy and
• Key third-party supplier dependencies.
Predictions • A description of the drivers of the need implementation approach
for change. This section should address • Description of project management
the target operating model, gaps, risk infrastructure, identifying the tiers of
Let’s talk
management, tax law or practice changes, governance, timelines and key deliverables, 8. Project risk and key assumptions
and efficiency of process and reduction of scope management and change control, • Known risks to the project’s success.
costs. The description also should provide key resource needs, and the key project
an overview of the supporting analysis and • Agreed-upon assumptions for project
management roles.
the critical success factors. execution.
• Details on how the particular proposals
address the business and tax challenges, 5. Comparison of alternatives
and how this is the most appropriate way of
dealing with the challenges. • Alternatives considered and the associated
evaluation as well as the consequences of
• An indication of the wider impact on the doing nothing.
business including other teams, staff, and
culture. • Conclusion on why the proposed option is
the most appropriate.
| 21 | Previous Next Building the business case for changeTax Function of
the Future series
Let’s dig deeper: Building and presenting the business case
for change
Introduction The forum
Heads of Tax recognise communication as the #1 skill for them and its
The business case should be delivered to importance will increase. Overall, Tax leadership spends most of their time
Executive summary Tax’s key internal stakeholders. Thus, if on tax and business strategy and management of the team – their most
Tax reports to the CFO, the CFO would Survey
important skills are communication (1st) and people management (2nd).
Let’s dig deeper be among the first to review the solutions
presented, as he or she is already
Building the business case
familiar with the goals and objectives The delivery
established for Tax. Other important
Current strategy Delivery of the business case will require Tax needs to be better at
internal stakeholders, including Finance,
Operations, and IT, need to be included Tax executives to demonstrate strong articulating the value that the
Tax strategy effectiveness Tax function brings to the wider
in the proposed change. This buy-in from leadership, business partnering, and
other functions is essential either because communication skills. Tax executives business.
Tax strategy challenges
their involvement is critical to the should consider their approach to Tip
Options for change successful delivery or because they will presenting their case for change as they
be impacted by how Tax delivers. These may not be addressing stakeholders with
Structure and presentation groups need to understand and support a comprehensive background in Tax.
serve as members of the team can be
the change, the overall tax strategy, and Executive communication skills – the
achieved by focusing on the impact of
Bringing it all together how they are contributing to the overall ability to convey complex ideas simply
the change at an organisational level.
success of the organisation through their without too much technical detail – are
Most notably, tax executives should
Predictions support of Tax. critical.
clearly articulate the value Tax brings
In addition, Tax executives will need to to the wider business and how the
Let’s talk
The key stakeholders for Tax leverage their relationships with other proposed changes can benefit the entire
are senior management—with functions to get their buy-in for the organisation as opposed to presenting an
CFO first, CEO second, and project. Influencing other functions to isolated opportunity for Tax.
Survey
corporate board third.
I have spent a fair bit of time considering my approach and style for
presenting my case to the executive committee. I asked about the
personalities around the table and practiced my approach with a
senior colleague.
—H
ead of Tax, banking
| 22 | Previous Next Building the business case for changeTax Function of
the Future series
Let’s dig deeper: Building and presenting the business case
for change
Introduction Monitoring and Intro text if needed....
reporting results
Executive summary After successful delivery of the business Header 01
case, Tax needs to periodically measure
Let’s dig deeper and report on the effectiveness of its Header 02
execution, the approach adopted, and Body copy style here...
Building the business case
choices made. Business sponsors and key
Current strategy
stakeholders should be kept apprised
of performance against the original
Tax strategy effectiveness business case and KPIs. A governance
and review process should be in place
Tax strategy challenges to ensure that risk is managed and
that there is alignment between IT and
Options for change Finance budgeting processes.
Structure and presentation
Tax dashboards should be established
for periodic review of agreed upon KPIs.
Bringing it all together Although dashboard solutions may vary,
Tax should seek to use the best available
Predictions technology, possibly leveraging solutions
that already exist within Finance or
Let’s talk other functions. Tax should utilise data
analysis solutions that present results
in a dynamic and compelling fashion,
focusing attention on the Tax function
and its operations.
| 23 | Previous Next Building the business case for changeTax Function of
the Future series
Bringing it all together
Introduction
The global tax landscape is changing The Tax function cannot begin the sensitisation, professional skill sets,
rapidly, resulting in significant transformation process without and processes may become essential to
Executive summary implications for the Tax function. In alignment of key stakeholders within performing even routine activities and
light of this challenging environment, the organisation. In order to obtain this addressing goals for managing taxes,
Let’s dig deeper organisations need to develop a clear backing, Tax will need to ‘make its case’ risk, operational cost and effective
strategy for Tax that is delivered as to why now is the time to pursue internal and external communication.
Building the business case effectively and measured by KPIs that are change. Stakeholders will need to justify
It is important for Tax to not only
aligned with business goals, supported by the additional budget and resources.
understand the business, but help the
Current strategy a strong formalised business case. Where Putting forth a clear case for all
organisation understand that what is
there are gaps in performance, Tax needs transformation activities and associated
Tax strategy effectiveness occurring in other functions may be
to develop a plan that addresses those change management, should include
triggers for Tax. It also is important for
gaps using a target operating model a discussion about the strategic value
Tax strategy challenges Tax to educate other functions on how
approach to technology, people, process/ the investment brings for the overall
and why business changes and external
organisation, and data. With cost/benefit organisation.
Options for change demands have an impact on tax and the
analyses and a manageable road map,
Tax will no longer be ‘ok’ just maintaining business. Collaborating and building
Tax can communicate to stakeholders a
Structure and presentation the status quo. Our survey of global PwC relationships with other functions will
compelling business case for change.
tax clients indicates that enhancements enhance Tax’s ability to successfully
Bringing it all together
in tax technology infrastructure, data deliver the business case for change.
Predictions
Let’s talk
One of the most important skills and the most lacking in Tax is communication, the ability to explain
tax issues to non-Tax team members so that they can understand. Tax should spend more time listening,
developing relationships and being helpful to other functions. Listening is key since it is important to
understand issues fully in order to calibrate the appropriate actions. It’s not just about the Tax agenda, it is
about developing Tax people to be organisationally cognizant.
—A
lex Peng, Emerson Electric
| 24 | Previous Next Building the business case for changeTax Function of
the Future series
Bringing it all together
Introduction
As with most organisational Intro text if needed....
transformation, change will not be
immediate and will require a 3-5 year
Executive summary Header 01
plan that should be revisited on an
Let’s dig deeper annual or semi-annual basis to allow Header 02
adjustments for inevitable changes to
Building the business case priorities. Carefully considering the Body copy style here...
timing of solution implementation
Current strategy to accommodate budgets and other
business activities is an important aspect
Tax strategy effectiveness of the business case. A well thought-
out roadmap presents Tax as a function
Tax strategy challenges that is critical to the organisation, yet
considerate of other needs and helps to
Options for change
set a positive path forward to change.
Structure and presentation
Bringing it all together
Predictions
Let’s talk
| 25 | Previous Next Building the business case for changeTax Function of
the Future series
Predictions
The global predictions we present in this thought leadership series include the following. We hope
they inspire Tax executives and team members to forge a new future vision for their Tax function.
Global legislative and regulatory • Strategic focus on jurisdictional reporting • The vast majority of tax functions will
Introduction
landscape and documentation of business activities, rely on professional data analysis tools to
• Global tax information reporting including transfer pricing, will be critical assist in the decision-making process in
Executive summary
requirements (e.g., CbCR and similar to managing the increased tax controversy areas such as detection of risk, opportunity
transparency initiatives) will grow resulting from transparency initiatives. identification, projections and scenario
Let’s dig deeper planning, and overall business support.
exponentially and will have a material
Building the business case impact on the operations and related Data flow into the tax function
budget allocations within the tax function. • The majority of tax functions will receive Tax function roles and processes
Current strategy • Regulators will demand transparency all information in a ‘tax-ready format’ • Most global tax preparatory compliance
regarding global taxation, necessitating from either their enterprise-wide financial and reporting activities, including data
Tax strategy effectiveness clear and thoughtful communications systems or a dedicated tax data hub. collection and reconciliations, will be
with public stakeholders about corporate • Dedicated tax data hubs will become performed within the company’s shared
Tax strategy challenges contributions to the communities in which mainstream and be developed internally, service centre or will be co-sourced with a
they do business. licensed from a third-party vendor, and/ third party.
Options for change or accessed through an accounting firm as • Tax functions will use real-time
• Information sharing will be commonplace
among taxing jurisdictions, and taxing part of a co-sourcing arrangement. collaboration tools to automate their
Structure and presentation workflow, document management,
authorities will have the capability to mine • Data security will be high on the
data and conduct global audits, resulting agenda of tax functions due to concerns calendaring, and internal controls.
Bringing it all together
in increased disputes. over confidential information being
inadvertently released or shared publicly. The tax professional of the future
Predictions
Tax function’s role in risk • A successful tax professional of the
management and governance Technology automation for tax future will be highly proficient in data
Let’s talk function analytical tasks
• Many jurisdictions will legislatively require analysis, statistics, and technology,
the adoption of a tax control framework • More companies will use their enterprise- as well as process improvement and
which follows guidelines similar to wide financial systems to prepare tax change management.
Sarbanes-Oxley and COSO (Committee calculations (e.g., income tax accounting • Tax functions will employ dedicated
of Sponsoring Organisations of the and indirect taxes), thereby replacing tax IT, data and project management
Treadway Commission). spreadsheets and/or traditional tax specialists who will develop, champion,
• Enhanced stakeholder scrutiny and technology solutions. and execute the tax technology and
reputational risk will force companies transformation strategies.
to continuously re-evaluate their
tax decisions.
| 26 | Previous Next Building the business case for changeYou can also read
