Today’s tax departments have the potential to be critical assets for their organization – drivers of transformation and pioneers of a connected, data-centric culture. How can they best communicate this potential? Tax leaders need to improve their ability to communicate their vision; However, a recent survey conducted by Industry Dive, a leading journalism firm, in partnership with Ryan, a global leader in tax services and software, revealed a major gap between CFOs and corporate tax heads.
The survey showed that while senior tax professionals viewed the tax function as generally effective, a large percentage of senior finance professionals took a very different view, with nearly a third viewing the tax function as ineffective in optimizing tax returns and identifying the tax consequences of large ones transactions. One in four finance executives also viewed the tax function as ineffective for containing costs and communicating with finance.
The survey results point to a larger underlying problem for tax managers. Their challenge is to demonstrate to the C-Suite the strategic value that the tax function can bring and to secure investment in the tax function to grow that strategic value. Given this reputational deficit, how can tax departments improve their perception by C-suite and finance leaders?
What causes the split?
First, tax practitioners should understand the root cause of the perception gap. “The survey results aren’t too surprising,” says Suzanne den Breems, Ryan’s head and practice manager for VAT returns. “Control teams typically focus on mitigating risk in areas that can lead to the biggest problems, leaving team members isolated while they devote their bandwidth to this integral but subordinate work.” Finance can be decoupled, and finance leaders rarely see evidence of the high value that a tax department can deliver at its best.
“Most of the time, tax focuses on compliance rather than optimization because a tax audit keeps them up at night,” says den Breems. “Being able to work on recovery, strategy, or transformation is a luxury of time they don’t have.”
Five steps tax professionals can take to build their reputation with CFOs
While it may be a daunting task, the five steps below can be an easy beginning of a longer journey, culminating in a forward-thinking and forward-thinking tax department.
- Communicate and endorse
“Tax leaders have two choices: stick with the status quo or build a compelling business case for change,” said Andrew Burman, Ryan’s tax transformation principal. “Without a clear vision and the commitment of resources, tax professionals will get stuck in a repetitive, low-level compliance loop, where they are so busy with compliance and audit tasks that they don’t have time for strategic work.” To avoid a compliance loop, tax leaders must communicate their vision and commit to tax transformation that enables their departments to become strategic profit centers for their organizations.
- find efficiencies
Bringing in outsourced, world-class expertise to assess the tax department can help identify gaps – for example, by improving processes and systems through the use of automation – and ultimately breaking the compliance loop. “Working with a tax partner can help by first uncovering the physical savings to enable investment in tax conversion technology, and to free tax professionals time for higher value work,” says Scott Fowler, Client Services Principal at Ryan.
- improve data
Tax leaders should portray the tax function as a proponent – and practical implementer – of improved data quality and transparency across all functions, even beyond finance and tax departments. Data quality must be maintained from the start if it is to be used strategically. Therefore, the tax department must work proactively to understand how other business functions collect and work with data. Tax leaders also need to coordinate with IT on how the organization’s systems collect and manage the data, and assess what existing tools and technologies are available and could be better leveraged within the organization.
- Become an internal resource
Senior Tax Executives can and should become an internal resource for the CFO and others in the C-suite to understand the future of tax regulation and its business implications. By taking on this role, tax leaders can contribute to the company’s strategic planning and profitability while enhancing the reputation of the tax team.
- Maximize VAT refunds
Tax officers can also contribute to the profitability of the company by assessing their VAT ecosystem. A VAT audit can help identify and resolve transaction gaps that have adverse economic impacts. The tax function – along with finance, accounting, operations and IT – is responsible for ensuring data quality, timeliness, reporting structure and reliability. Therefore, an outsourced tax partner that performs VAT auditing can serve as a cross-functional bridge that not only maximizes VAT recovery, but also maximizes the organization’s understanding of its tax obligations.
Tax leaders face a major challenge in bridging the perception gap between themselves and CFOs, and they must face this challenge head-on to secure investment in building a strategic tax function. To achieve this, tax officials need to communicate the need for change; find efficiencies through outsourcing, if needed; improve data quality; and become an internal tax resource for strategically planning and maximizing VAT recovery to contribute to company profitability.
Download our new whitepaper, Building a Case for Change – How to Amplify the Strategic Value of Your Tax Function, now to read the full results of the recent survey of tax and finance leaders across Europe.