Tax Transformation Trends Survey Operations in Focus

Tax transformation trends survey Operations in focus

May 2021 Tipping point: Business leaders embrace a new role for the tax function

A fresh business Meanwhile, companies are For instance, as companies change teaming imperative positioning themselves to thrive their business models for the digital post-pandemic: shoring up their era or invest in green initiatives, While 2020 was the year that finances, accelerating digital failing to understand the tax turned business and society on its and sustainable transformation, implications—in areas where the head, 2021 brings the opportunity embedding new ways of working, rules are still nascent and evolving— to reshape them for the future. and identifying new growth may leave significant value on the opportunities. table, or worse still, undermine Governments have big decisions the success of the new strategy. As to make about how they address The tax function sits at the businesses map out their growth mountainous deficits, how they interface between companies plans for the recovery, they will build more sustainable economies, and governments as these decisions need to call on forecasting and and the future of globalization. play out, and its strategic insight scenario modeling capabilities often will be more in demand than found in tax teams, to get a deeper ever before. understanding of financial resilience.

All of this creates a new business partnering and collaboration imperative for company tax functions. The C-suite can no longer afford for their tax teams to be consumed by routine compliance and reporting activity.

For tax to truly deliver on its new mission, businesses need to reset the boundaries of the primary remit of the tax function, free up resources, and transform its technology infrastructure. The good news for tax and business leaders is that the tools to achieve this are increasingly at their disposal.

Tax transformationTax transformation trends trends survey survey 1 1 Tax operationsTax operations in focus in focus Table of contents

01 – 03 Introduction

04 – 09 Six key insights

10 – 13 Redefining the tax core

14 – 18 The partnering vision

19 – 24 Tax transformation

25 Accelerating change on three fronts

26 Contact: Get in touch

27 More about the research

Tax transformation trends survey 2 Tax operations in focus This report, produced by What should be the Deloitte, brings together future role of a tax team? the perspectives of How is its core focus changing? business, tax, and finance leaders from around the What are the operational globe to answer some key changes that will pave the way for questions on the future of tax to add more value as the tax function: a business partner?

How can tax leaders accelerate the transformation journey?

Tax transformationTax transformation trends trends survey survey 3 3 Tax operationsTax operations in focus in focus Six key insights

Aspirations for tax to add more strategic value must be 65% 1realized faster as companies accelerate business model Digital business transformation models Tax leaders must Companies are being pushed to have the resources develop new digital products and and skills to distribution channels, and accelerate provide deeper sustainable transformation—which % advisory support is taking them into uncharted 49 for their business tax territory. counterparts Tax leaders said their teams must over the next have the resources and skills to give two years. deeper advisory support on digital Supply chain restructuring business models (65%), supply chain restructuring (49%), and sustainability (48%) over the next two years.

This means redrawing the boundaries of what tax professionals focus 48% on, and accelerating adoption of advanced technologies and lower- cost resourcing models to meet compliance requirements and free up time. Sustainability

Tax transformation trends survey 4 Tax operations in focus Six key insights

The last two years have been a watershed for 2transforming tax compliance and tax team resourcing models

Collaborative business partnering trend looks set to continue, but demands are on the rise, but tax leaders must plan with 93% of tax leaders said their foresight, and with the changing department’s budget is remaining policy landscape in mind. Percent of survey respondents

flat or will fall. that said their tax budget will For instance, indirect tax work remain flat or will fall. To ensure tax can redefine itself has been a key area to outsource, as a strategic function at the but the rising popularity of such pace that is required, leaders taxes among policymakers will are choosing to move increasing undoubtedly require some amounts of compliance and dedicated internal expertise reporting to a combination in this area, working of shared services centers, further upstream within the finance department, and the business to provide outsourcing providers that strategic counsel. have invested in best-in-class technology. The data shows a % dramatic shift of compliance work 93 out of group tax teams between 2019 and 2021, as resourcing models hit a tipping point. This Six key insights

The rapid shift towards digital tax administration 3is adding further urgency to operational transformation

In addition to the rising focus on business partnering, transformative changes to the way companies are being required to provide tax information to revenue authorities (such as electronic filing and real-time reporting) is also creating an imperative to modernize operations at a faster pace.

Nine in 10 (92%) respondents say that shifting revenue authority demands on digital tax administration will have a moderate or high impact on tax operations and resources over the next five years—and several heads of tax say the trend is moving faster than expected. 92%

Tax transformation trends survey 6 Tax operations in focus Six key insights

Tax leaders are prioritizing data simplification and 4lower-cost resourcing 53% as a foundation for their future vision

Respondents said simplifying data management Simplifying (53%) and moving to lower-cost resourcing data management models (51%) must be prioritized if tax is to Higher value become more proactive in delivering strategic to the business insights to the business. These initiatives are at Lower-cost the top of the transformation agenda over the resourcing models next two years.

51%

Tax transformationTax transformation trends trends survey survey 7 7 Tax operationsTax operations in focus in focus Six key insights

CFOs are beating the outsourcing drum the loudest Nearly half (44%) of the C-suite respondents1 in the 5study—which were mainly made up of CFOs—thought outsourcing will be the most important strategy for tax to achieve lower-cost resourcing models, ahead of deeper automation (39%) or increased reliance on shared services centers (31%).

Alternatively, (47%) of tax leaders said migrating more activities into the finance group and other internal teams will be the most important solution.

C-suite respondents see outsourcing as the most important strategy for a lower-cost resourcing model.

44% vs. 39% vs. 31%

Outsourcing Deeper automation Shared service centers

1 Tax transformation trends survey Out of 304 overall web-based survey respondents, there were 67 C-suite respondents. 8 Tax operations in focus Six key insights

Highly effective at supporting the business

Those most advanced NextGen on their operational ERP Advanced Moderate 6transformation or low journey are those adding more strategic value today % % Of tax teams that consider 56 35 themselves advanced in introducing NextGen ERP systems to simplify data management, 56% are also highly effective at supporting the business with scenario-modeling insights. Only 35% of those with moderate to low use of NextGen Highly effective at adding forward- ERP said the same. looking insights on tax policy

Similarly, those that have made Outsourcing progress the most progress with their Most Long outsourcing plans for compliance progress way off and reporting are adding more value through forward-looking insights on tax policy: 54% are highly effective at this, versus 40% of those that are still a long way off 54% 40% from their ideal outsourcing model.

Tax transformation trends survey 9 Tax operations in focus Time to redefine the tax core

There’s still a heavy Even before COVID-19 struck, Tax teams were called into action compliance load today, businesses in many sectors were to help their companies navigate trying to accelerate business model the turmoil, from partnering with but the vision for the and operational transformation the human resources department future would be that initiatives. Much of this was driven to assess the impact of displaced much of that falls away, by mega trends such as digital workers and remote work models, and tax people become disruption and climate change to understanding financial subject matter experts that presented new risks and resilience. opportunities. who help program the The capacity challenges highlighted machine, ensure quality The pandemic intensified the by the pandemic appear to be control, and redirect their pressure to transform, putting foreshadowing the road ahead. corporate resilience to the test like As companies embark on the time to advisory activity. never before: 94% of the Fortune recovery, tax leaders anticipate Joanne Walker 1,000 had experienced supply chain growing demand for advisory Group Tax Director, BT Group Plc disruptions by February 2020,2 while support to the business related more than 100 countries had to digital business models, instituted lockdowns by the end of supply chain restructuring, and March 2020, forcing companies to go sustainability (see Figure 1 below). completely digital.

2 94% of the Fortune 1000 are seeing Coronavirus supply chain disruptions, Fortune, February 2020. Figure 2. Business areas where respondents expect increased demand for tax advisory support from the tax department (Chart shows percentage of respondents rankingB usinesseach area areasin the top where three) respondents expect increased demand for tax advisory support from the tax department Figure 1

Chart shows percentage of respondents ranking each area in the top three.

65% 49% 48% 46% 44% 30%

Digital Supply chain Sustainability/ Strategic Corporate Government business restructuring CSR activity transactions treasury/ relations models activity e.g. M&A/ ﬁnancing activity divestment activity activity

Tax transformation trends survey 10 Tax operations in focus Redefining the tax core

These rising demands for business partnering come at a time where resources are extremely stretched for many tax departments.

In our survey, 93% of respondents said their tax department’s budget will remain flat or fall this year.

Figure 2a

Increase more than 20% Increase 10%-20% Increase less than 10% 4% 17% 29% 43% 4% 3% Remain flat Decrease less than 10% Decrease more than 20%

Change expected to tax department budget in 2021 in real terms. Decrease more than 20% Decrease 10%-20% Decrease less than 10% Remain ﬂat

Increase less than 10% Increase 10%-20% Increase more than 20%

Only 34% expected to increase headcount for tax-related The crisis caused a roles over the next five years. flurry of stress testing Figure 2b exercises which triggered a surge in tax 4% 10% 22% 30% 20% 11% 3% forecasting demands. We had to do two years’ worth of forecasting in

Change expected to total headcount working in either main tax department or 12 months. dispersed/shadow tax team over the next five years. Decrease more than 20% Decrease 10%-20% Decrease less than 10% Remain ﬂat Richard Craine Increase less than 10% Increase 10%-20% Increase more than 20% Group Tax Director, Barclays

Tax transformationTax transformation trends trends survey survey 11 11 Tax operationsTax operations in focus in focus Redefining the tax core

So, how do tax leaders square the “We believe the skill set for down with managing data—which isn’t circle? Many tax leaders are turning delivering reliable, robust the best use of tax talent.” to redefining the core tax team’s compliance processes is often best Embracing this business partnering primary role in the business, from delivered through an outsourcing role, as well as adapting to meet a compliance and reporting unit provider,” said Anna Elphick, VP new digital tax compliance demands, into a strategic division. This means Tax, Unilever. “That means our will be the key drivers of tax operations shifting increasing amounts of tax people can really focus on and resourcing transformation over compliance work to shared services understanding the business, the next two years (see Figure 3 below). teams or outsourcing providers making sure we are partnering at that have invested in best-in-class the right time with the right level of technology and delivery centers. engagement and not getting bogged

Figure 4. The biggest drivers of change for tax operations and resourcing models over Thethe next biggest two years drivers (Chart of shows change percentage for tax of respondents operations ranking each area in the top four) and resourcing models over the next two years Figure 3

Supporting ﬁnancing/ 45% reﬁnancing needs

Supporting shift to online 43% business models/new fulﬁlment

Facilitating move to real-time, 43% digital tax compliance

Changes to tax 43% policy/legislation

Embedding changes 39% to ways of working

Supporting on supply 36% chain restructuring

Supporting strategic 34% transactions Chart shows percentage Increasing commitments 31% of respondents ranking each related to ESG* issues area in the top four. Responding to disruption 30% caused by Brexit

More aggressive revenue 26% authority enforcement

*ESG (Energy, Sustainability, Governance) Tax transformationTax transformation trends trends survey survey 12 12 Tax operationsTax operations in focus in focus

Total Europe North America APAC Redefining the tax core

Tax leader perspective: The race towards digital tax administration

The OECD Forum on Tax Administration published a discussion paper in November 2020 outlining a new model for the future of digital compliance, whereby tax processes are integrated into wider business processes, so tax can be determined in real-time as transactions occur.3

Revenue authorities are moving at varying speeds to implement real-time, digital compliance models, unsurprisingly mainly focusing on transaction-based indirect taxes so far. But this will expand. Already leaders say the pace of change has been striking—and getting prepared requires significant operational change.

A dizzying pace of change for indirect Leaders are preparing for tax compliance in emerging markets real-time corporate tax compliance, despite skepticism “The world is moving towards granular real-time tax and finance data—you can see how quickly “The ability to interrogate transaction-level data is quite territories like Russia and India have moved with VAT. relevant to quality assurance around VAT, so I And that presents a challenge, because right now see the benefits there. But corporation tax begins we’ve got that data every month and aggregated.” with the accounting measure of profit, and is then Global Head of Tax, Global Bank determined by reference to all sorts of complicated rules, requiring different treatments. So I think It’s really stepped up in the last couple the scope for improving compliance risk through of years. Tax authorities don’t just want digitalization is quite limited for large businesses. a faster turnaround for compliance, but That said, we need to be ready, which will mean automating links between multiple ledgers if we access into a company’s systems. want to have straight-through flow of that data.” It’s not unreasonable to think that in Richard Craine, Group Tax Director, Barclays a much shorter time than we expect, compliance will be about companies “If we have to provide corporate tax information to reviewing a return that’s been drafted revenue authorities in real-time, it pushes some of the tax decisions further upstream, meaning we would by the tax authorities. need to revisit our current tax processes.”

Anna Elphick Joanne Walker, Group Tax Director, BT Group Plc VP Tax, Unilever

3 Tax transformation trends survey Tax Administration 3.0: The Digital Transformation of Tax Administration, OECD Forum on Tax Administration, November 2020. 13 Tax operations in focus The partnering vision

Tax leaders know their teams There is still a need to educate We’re using the data can play a bigger role to help the wider business on where captured from smart protect and create value for the tax insights can help to drive business, particularly as commercial profitability, and to build the sensors on industrial strategies see companies intersect case for early engagement. Our machinery to create new with nascent, fast-evolving areas of survey found that while tax is predictive services for tax policy such as digital services frequently being brought in our clients. and sustainability. But they to advise on the early stages recognize that there are hurdles of M&A discussions, there are For that business model to maximizing this role today, opportunities being missed when both in relation to the tax team’s it comes to product development, alone, you’re looking at a interconnectedness with the restructuring initiatives and digital whole host of transfer business, and the current state of transformation, among others pricing, customs, and operations and technology. (see Figure 4 below). indirect tax implications that need attention. The tax function is typically engaged early for M&A Figure 5. When the tax function is typically engaged on diﬀerent business initiatives Christian Kaeser but results are mixed for other strategic moves Global Head of Tax, Siemens

Figure 4

M&A or divestment activity 73% 27%

Entering new country 54% 46% When the tax function is typically engaged markets/jurisdictions on different business initiatives.

Changes to ﬁnancial technology 52% 48% systems/digital transformation Initial discussion stage Formal planning stage Supply chain restructuring 49% 51%

New product launches 49% 51%

Group restructuring 48% 52%

Initial discussion stage Formal planning stage

Tax transformation study | 2 Tax transformationTax transformation trends trends survey survey 14 14 Tax operationsTax operations in focus in focus The partnering vision

Figure 6. Barriers to the tax function delivering more strategic value to the business (ChartLack shows of percentage resources of and respondents time are ranking the biggest up to 3 barriers, where 1=the biggest barrier) barrier to delivering strategic value Figure 5 Chart shows percentage of respondents ranking up to 3 barriers, where 1=the biggest barrier.

55% 52% 46% 44% 43% 35% 1% Lack of Data Tax team not Lack of Lack of Outdated tax Other resource management engaged necessary support from technology We partner with and/or time challenges early enough skills within senior to have an tax team stakeholders divisions that want to impact undertake transactions, and we’ll be engaged to Value is being left on the table Tax leaders said not having where the tax department is the right data at their check feasibility given not being engaged early on in fingertips and resourcing tax costs, but it’s quite a strategic decision-making. The challenges are impeding current barriers are not just partnering activity with their reactive model for now. about executive teams bringing business counterparts (see tax in early enough—operational Figure 5 above). Once we get real-time and technology constraints are data flowing in, we’ll see holding them back, too. things they can’t, and then we’re on the front foot, providing insights that can help drive profitability.

Global Head of Tax, Global bank

Tax transformation study | 2 Tax transformationTax transformation trends trends survey survey 15 15 Tax operationsTax operations in focus in focus The partnering vision

FigureWhere 7a. Where respondents respondents aspire aspire toto addadd more more partnering value in the short term (nextpartnering 1-2 years) (Chart value shows in thepercentage short of term respondents selecting all options that apply) Figure 6 Next 1-2 years

Advising on emerging regulatory and 52% Chart shows percentage of compliance issues respondents selecting all options that apply. Educating tech and data teams on 52% tax issues These challenges were Educating sustainability teams on tax 50% reflected within the issues survey respondents’ Using scenario modeling to inform business partnering 46% strategic decisions aspirations, in that they

Providing forward-looking insights expect to add more value 45% about tax policy changes in the short term by advising on emerging Mitigating reputational risks 44% compliance issues, and by educating technology Delivering reliable ETR forecasts 44% specialists about how to ahead of time unleash the power of data in the tax function (see Figure 6).

Tax transformationTax transformation trends trends survey survey 16 16 Tax operationsTax operations in focus in focus The partnering vision

FigureWhere 7b. Where respondents respondents aspire aspire to to add add more more partnering value in the longer term (nextpartnering 3 years+) (Chart value shows in percentage the longer of respondents term selecting all options that apply) Figure 7 Next 3+ years

Delivering reliable ETR 44% forecasts ahead of time Chart shows percentage of respondents selecting all options that apply. Providing forward-looking 44% insights about tax policy changes

Using scenario modeling to 42% inform strategic decisions

Mitigating 41% reputational risks

Educating sustainability 38% teams about tax issues

Advising on emerging regulatory 35% and compliance issues

Educating tech and data 35% teams about tax issues

When we asked about business will be equipped with the data to partnering in the longer-term, support the business with better respondents envisage having scenario modeling capabilities, modernized their technology which in turn informs real-time, and operations. This means they strategic decision-making (see Figure 7 above).

Tax transformationTax transformation trends trends survey survey 17 17 Tax operationsTax operations in focus in focus The partnering vision

Tax leader perspective: Identifying value-creation opportunities

Across industries, the tax leaders we interviewed were unanimous that agility is more important than ever for the future success of their companies. They highlighted a host of areas where tax can step up to support strategic decision-making. We outline just a few of these here.

Digital business models Sustainability Intellectual property

In part of its business, Siemens At Suncor, VP of Tax and Treasurer, In the technology sector, intellectual has developed a new data-driven Mike Munoz said the fast-evolving property (IP) is a major contributor service which entails capturing data environmental policy landscape to profit margins.

from smart sensors on industrial is putting new demands on the A VP of Tax at a technology machinery from clients around tax team. company said freeing up his team the world, and running predictive “Transitional shifts in government to spend more time with product analytics to provide better efficiency, policy on climate change necessarily innovation and supply chain uptime, and longevity. This brings tax find their way into taxation. We decision-makers will drive more complexity. need to look at carbon taxation, value for the business. “Transfer “We have to look at whether we need emissions compliance, clean fuel pricing is a big-ticket item for us to set up a permanent establishment standards and incentives— then so I’d like my team looking even (PE) because we keep spare parts there’s the question of how deeper at where IP is held, the legal on site for maintenance and our governments fund and implement and economic beneficial owner and sensors are there, so we assess how these clean initiatives which has the remuneration of the parties in we structure that and if we need a very direct influence on income the transaction,” he said.

to allocate income to that PE,” said tax and transactional tax policy,” “We’d spend more time looking at it Christian Kaeser, Global Head of Tax, he said. “I’m being pulled closer from the auditor’s perspective and Siemens. “Then there’s the data that to our government relations and doing mock audits to understand we collect—is that part of the value sustainability groups to advise where we might have weak points, exchange? We have the contract with on the implications of these and to build those defenses up to the customer to allow us to collect developments.” protect and enhance margins.” it, and we’re using it to feed our algorithms, so we have to consider the position that revenue authorities are likely to take on that.”

Tax transformation trends survey 18 Tax operations in focus Tax transformation

Getting there faster

For tax leaders to fulfil their efficient teams in shared service We automated the business partnering aspirations, centers, finance departments, or source P&L process for they will need to ensure their outsourcing providers manage the compliance and reporting bulk of the compliance workload. transfer pricing which operations run like a well- took a huge burden off oiled machine. In practice, this Many tax leaders in our survey means tax specialists advising are prioritizing data management of the divisions. Then we upstream in the business, simplification and lower-cost created a transfer price while a combination of robotic delivery models as the foundation process automation and highly- for this (see Figure 8 below). database to deposit and Figure 8. Measures being prioritized over the next two years for tax to deliver more retrieve data so we have strategicSimplifying value to the data business management (Chart shows andpercentage moving of respondents to rating each area as a high priority (scoring 8-10 on a 0-10 scale) limited impact on the lower-cost resourcing models are top priorities Figure 8 divisions. We are moving to a single ERP platform Data management 53% simpliﬁcation which will help us take

Shifting towards lower the next step with 51% cost delivery models robotics. Accessing more skills/resources from 51% the ﬁnance and tech departments David Furgason VP Tax, Stryker Educating IT/ﬁnance functions 50% on tax’s data and analytics needs

Implementing a next 49% generation ERP system

Achieving near-full/full automation 48% of compliance and reporting

Implementing/increasing 48% use of SSCs Chart shows percentage of respondents who resourced Adopting artiﬁcial intelligence primarily compliance and 44% tools for data analytics reporting activities within the group tax department rating Accessing external talent with expertise each area as a high priority 43% in tax tech and ﬁnancial systems (scoring 8-10 on a 0-10 scale).

Tax transformationTax transformation trends trends survey survey 19 19 Tax operationsTax operations in focus in focus Tax transformation

Figure 9.Impact Eﬀectiveness of NextGen of the tax ERPteam systems at delivering value to the wider business today (Charton ability shows percentage to deliver of respondents strategic citing value 8-10 ‘(highly eﬀective’) on a 0-10 scale) Figure 9

Percent of respondents Advising the business on emerging 37% who said they are regulatory and compliance issues 64% highly effective. Educating sustainability teams 38% about specialist tax issues 61% For respondents where compliance and reporting Automating tax compliance 36% activities are resourced and reporting processes 61% primarily within the group tax department the chart Educating tech and data 36% shows the percentage of teams about tax issues 61% respondents citing 8-10 (highly effective) Providing forward-looking insights 37% on a 1-10 scale. about tax policy changes 57%

Using scenario modeling to inform 35% the company’s strategic decisions 56% NextGen ERP system/Moderate/Low Reducing 34% NextGen ERP system/Advanced operating costs 55%

Mitigating tax-related 31% reputational risks 54%

Delivering reliable ETR 28% forecasts ahead of time 58%

At BT Group Plc, Joanne Walker the tax function, but these projects tax returns that no human touches said the tax team is helping to lead can take several years to complete. anymore,” he said. “For instance, the implementation of a cloud- In the meantime, tax can still find with the IRS audit, they issue based ERP system, which should ways to make faster progress. information document requests, be transformative for compliance asking for trial balances and other Total NextGen ERP system/Advanced NextGen ERP system/Moderate or low operations. “At the other end of At Stryker, David Furgason, the data—the robot can go and grab all this project, we want a system with Vice President of Tax said that of that data for us.” controls built in that produces high while they are still in the process of In our survey results, we can already quality data which can be used to consolidating multiple ERP systems,low= green advanced=bluesee better business partnering generate tax reports that are 80%-90% the tax team has worked closely outcomes being realized among of the way along before our in-country with the technology committee and those tax functions that have moved tax teams need to touch them.” outsourcing providers to automate wherever possible. “We were the further down the road in deploying Next generation ERP systems are an first at Stryker to bring robotics to next generation ERP systems (see important facilitator of automation in finance. There are probably 50-60 Figure 9 above).

Tax transformation trends survey 20 Tax operations in focus Tax transformation

Moving to more efficient resourcing was managing much of the workload models is the other key strategy related to indirect tax returns and leaders are prioritizing, and it payments in 2019, just 21% said this seems they are taking much is the case today. bolder steps on this front. This reflects a step change in Deloitte’s prior historical data the mindset of tax and finance indicates that there has been a executives. As the quality of skills tipping point over the last two years, and technology available in delivery whereby compliance and reporting centers outside of the tax team work has been moved out of group improves, they are being trusted tax at greater levels than we have to manage a greater share of these seen before (see Figure 10 below). workloads. Of course, group tax For instance, while 43% of must ultimately retain responsibility respondents said group tax for governing compliance.

Figure 10a. Percentage of respondents saying compliance and reporting activities are primarily resourced within the group tax department (Chart shows the percentage of respondents that primarily resourced diﬀerent compliance activities (e.g. indirect tax returns, statutory accounts etc.) within the group tax department in 2016 vs. 2019 vs. 2021) Many compliance activities are no longer being resourced within the group tax department Figure 10 Chart shows percentage of respondents that resourced 60 primarily different compliance 55 activities (e.g. indirect tax returns, statutory accounts etc.) within the 50 group tax department in 2016 vs. 45 2019 vs. 2021. 40 35 30

25 Global tax provision 20 Transfer pricing documentation 15 Corporate income tax 2016 2019 2021 return & payments Indirect tax returns Global tax Transfer pricing Corporate income tax Indirect tax returns Statutory & payments provision documentation returns & payments & payments accounts Statutory accounts

Tax transformationTax transformation trends trends survey survey 21 21 Tax operationsTax operations in focus in focus Tax transformation

How compliance and reporting activities are primarily being resourced Figure 10b. How compliance and reporting activities are being primarily resourced Figure 11 Compliance and reporting work is Transfer pricing documentation: Indirect tax returns and payments: being moved to a combination of Main approach to workloads Main approach to resourcing and workloads

shared service centers, finance 3% 5% 3% 11% 12% departments, and outsourcing 3% 15% providers. 30% 22% 21% Resourced within global tax In the examples to the right, 21% 10% Resourced in own shared service center we highlight the migration of 26% Resourced by another24% part of finance 12% transfer pricing documentation 17% Traditional outsourcing to third party and indirect tax returns that Outsourced via managed service 20% Other 22% has occurred over the last two 46% 43% years, but a similar trend is also observed in relation to global tax 22% 21% provision, corporate income tax 2019 2021 2019 2021 returns, and statutory accounts (see Figure 11 to the right). Figure 10b. How compliance and reporting activities are being primarily resourced While this trend is set to continTransferue now pricing that documentation: many tax Indirect tax returns and payments: Main approach to workloads Main approach to resourcing and workloads functions have moved past 3% 5% 3% the tipping point, it is also11% 3% Resourced12% within global tax Resourced within global tax Resourced in own shared service centreResourced in own shared service centre 15% important to think ahead about Resourced by another part of ﬁnanceResourced by another part of ﬁnance 30% 22% Traditional21% outsourcing to third partyTraditional outsourcing to third party the implications of changing tax Outsourced via managed service Outsourced via managed service 21% Other policy for this new model. Other 10% 26% 24% For instance,12% while indirect tax 17% compliance has been one of the key targets to migrate20% out 22% of group46% tax, particularly where 43% there are standardized and22% 21% rules-based processes across multiple2019 markets, it is also2021 an 2019 2021 area of particular attention for policymakers.

Resourced within global tax Resourced within global tax Tax transformationTax transformation trends trends survey survey 22 22 Resourced in own shared service centreResourced in own shared service centre Tax operationsTax operations in focus in focus Resourced by another part of ﬁnanceResourced by another part of ﬁnance Traditional outsourcing to third partyTraditional outsourcing to third party Sales Outsourced via managed service Outsourced via managed service Other Other

Sales Tax transformation

Governments around the world Also, in terms of the debate around Therefore, even as more indirect tax are increasingly looking to BEPS and how to manage transfer work may be moved out of the core indirect taxes and transaction pricing, one way to sidestep that is tax team, tax specialists will need to taxes to raise revenues, and to to collect more tax revenues from ensure they are working upstream find simpler ways of imposing indirect taxes instead,” said Unilever’s within the business to manage more levies on business activities Anna Elphick. “You can see that being sophisticated governance demands. that are complex to tackle with particularly attractive for less mature direct taxes. revenue authorities, as transactional tax methods for collection will be less “I think we will see growing trends complicated to administer. We will towards indirect taxes because it’s need to respond to make sure that easier to collect and corporate profits we’ve resourced our indirect are perhaps not as robust as they tax function to match that trend.” were pre-pandemic.

Tax transformation trends survey 23 Tax operations in focus Tax transformation

Tax leader perspective: Putting tax at the helm of digital transformation projects

The success of digital transformation initiatives will be one of the defining factors in whether tax is able to truly redefine its role in the business. Most of the tax leaders we interviewed reported that major technology projects were underway in their organizations, some encompassing the entire finance function and others more targeted in the tax department.

And, while varied approaches are being taken to redesigning technology infrastructure, giving tax a seat at the table is fundamental to achieving successful outcomes.

At Infineon Technologies, Global Head of Tax, BT Group Plc is also re-engineering its technology Matthias Schubert said the tax team was involved from as part of a major “Making Finance Brilliant” the outset as the finance function developed a new initiative at the company. Group Tax Director, cloud-based data management system. “We formed Joanne Walker said it has been critical for tax to be a VAT technology and governance group that has the involved at the design stage, so it can explain what right knowledge about how to change the system to the new systems need to deliver instead of simply ensure it generates the right reports,” he said. outlining the reports they will need, and to bring their expertise about what the future tax landscape “Involving them early was key as we took a greenfield will demand from the business. approach, so we could think about what the optimal processes would look like and how more intelligent “We know that making tax digital is on the horizon systems could make an impact. We’ve now got a tool for corporation tax, for instance, so we need to that can pull data from other systems such as supply ensure we’re looking ahead at those trends within chain and procurement, has intelligent determination the design process so that we can future-proof of the appropriate VAT rate, and it doesn’t have hard- ourselves as much as possible.” wired value flows or transactions, so it can develop over time.”

Tax transformation trends survey 24 Tax operations in focus Accelerating change on three fronts: People, process, and technology

As companies adapt their strategies that tax and business Deloitte will publish further strategies to compete in the leaders should be considering research on tax, finance, and new business landscape, over the short term, but that is business leaders’ insights into and the availability of better only part of the equation. the way forward on talent technologies and resourcing and technology. Look for two options grows, business leaders Tax leaders will need to accompany forthcoming reports in this are seeing a more compelling operational strategies with new series on these topics. case than ever to redefine the approaches to develop skills and tax function’s primary remit. talent, and a long-term plan to harness innovative emerging The challenge now is to technologies. accelerate the transformation. In this paper, we have outlined the operational transformation

Tax transformation trends survey 25 Tax operations in focus Get in touch We are here to help. Contact us to arrange a meeting to discuss your organization’s needs, respond to an RFP, or answer any other questions.

Andy Gwyther Emily VanVleet Deloitte Global Operate Leader Tax Operate Leader Tax & Legal Partner, Deloitte Tax LLP Partner, Deloitte UK [email protected] [email protected]

Daniel Barlow Christopher Roberge Managing Partner Tax Operate Leader Regional Markets Deloitte Asia Pacific Partner, Deloitte UK Partner, Deloitte Hong Kong [email protected] [email protected]

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Tax transformation trends survey 26 Tax operations in focus More about the research

This tax operations-focused For this first report, we collectively We thank all the respondents research is the first of a three- surveyed 304 senior leaders— including as well as the global tax part series Deloitte is producing over 100 heads of tax and CFOs—at a leaders who participated in in 2021 and 2022, engaging range of companies operating in 5 or the in-depth interviews. tax and finance executives at more countries across Europe, North companies to understand their America, and the Asia-Pacific region, to Figurestrategies 1. Final for surveytax operations, demographics understand – their304 future respondents vision for the tax to a web-based survey talent, and technology. function and how they plan to get there.

Country Sector US 24%

UK 20% 19% 19%

China 13%

Japan 13% 13% Canada 7% 11% 11% Germany 7% 9% Netherlands 5% 8% Switzerland 5% 6% Australia 3% 4% Belgium 3%

Financial TMT Manufacturing Consumer Healthcare Business Energy, Consumer Real services goods/ and life support resources & services estate products sciences services industrials

Role Company size

C-suite C-2 23% 36% 27% 44% 17% 8% 4%

C-1 41% US$750m to US$999.9m US$1bn to US$4.99b US$5bn to US$9.99bn

Survey sample size = 304 US$10bn to US$19.99bn US$20bn or more C-suite (e.g., CFO) = 70 C-1 (e.g. EVP, SVP of Tax or Finance) = 125 C-2 (e.g. Tax Directors, Tax Managers) = 109 Tax transformation trends survey 27 Tax operations in focus Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms, and their related entities (collectively, the “Deloitte organization”). DTTL (also referred to as “Deloitte Global”) and each of its member firms and related entities are legally separate and independent entities, which cannot obligate or bind each other in respect of third parties. DTTL and each DTTL member firm and related entity is liable only for its own acts and omissions, and not those of each other. DTTL does not provide services to clients. Please see www.deloitte.com/about to learn more.

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