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Session 7C: The Evolving Tax Function

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Bridget Linde – RGA

Jeff Thompson – Assurant

Jay Turchin – Grant Thornton

Jeffrey J. Webb – Deloitte Tax LLP

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Overview

External Challenges

Internal Pressures

Data

Value and Needs

Operation Models

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While a number of leading finance organizations are using pilots to experiment with new technologies, we aren’t yet seeing evidence of scalable, transformational change. The roadmaps to that future are still being drawn.

The good news? The technologies needed to reimagine Finance are here and they will only get better. Plus, we can learn a lot from other business functions. Modern factories give us a glimpse of what automation can deliver. Smart contracts show us new ways of tracking assets. The lessons are out there. We don’t have to reinvent the wheel. We can focus instead on adapting and adopting.

Here’s the bottom line. The business leaders that Finance supports are people first. They see how technology is making their personal lives better and easier. That’s what they want for Finance, too.

The needs of the business are growing. The pace of innovation is accelerating. CFOs can either plan for change, or plan to retire.

Where things stand today

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1. The finance factory Transactions will be touchless as

automation and blockchain reach

deeper into finance operations.

2. The role of Finance

With operations largely

automated, Finance will double

down on business insights and

service. Success is not assured.

The skills required by finance

professionals will change, likely

dramatically, as new combinations

of technology and human

workforces permeate the

workplace.

3. Finance cycles

Finance goes real time. Periodic

reporting will no longer drive

operations and decisions—if it

ever did.

4. Self-service

Self-service will become the norm.

Finance will be uneasy about this.

5. Operating models

New service-delivery models will

emerge as robots and

algorithms join a more diverse

finance workforce—think about

the integration of freelancers, gig

workers, and crowds. Companies

will assess the benefits of

automation against onshore and

offshore operations.

6. Enterprise resourceplanning

Finance applications and

microservices challenge traditional

ERP. Big vendors will be prepared.

7. Data

The proliferation of APIs will drive

data standardization, but it won’t

be enough. Companies will still be

struggling to clean up their data

messes.

8. Workforce and workplace Employees will be doing new

things in new ways, some of which

will make CFOs uncomfortable.

Finance Function Predictions

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Changing Environment: Trends impacting tax departments

Global regulatory changes

Rapidly changing

technology

Brand risk

Global transparency

Limited resources

Add more value

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External Challenges

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Tax Authorities Moving to Real-Time Reporting of DataDeloitte categorizes taxing authorities into four distinct group as it comes to Digitization of Tax:

• The compliance group. This group sees the digitization of tax as a smart, efficient means to transition a large “informal” economy into the tax system. Projections for revenue generation drive most decisions about digitization. This group includes South America and the Mediterranean.

• The efficiency group. Recognizes that the digitization of tax can deliver massive efficiencies to tax administration and management. These authorities are often seeking to leverage existing technology penetration to drive digital adoption in the economy. This group includes Southeast Asia, Scandinavia, and the former Baltic states.

• The developing market group. Encouraged and supported by international financial institutions such as the World Bank, this group is looking to leverage new technologies to help developing markets leapfrog into a new era of tax administration. This group includes Africa and Asia.

• The legacy group. This group’s tax authorities are relatively advanced and mature. They are struggling to achieve the value from digitization within legacy IT environments. This group includes markets such as Canada, France, Germany, the Netherlands, the United Kingdom, and the United States.

With tax authorities going increasingly digital, tax functions must look to improve data quality and insight by automating tax management processes, dashboarding, reporting workstreams, VAT compliance, and e-invoicing.

• Observers have several models to study, and many have looked to Brazil’s early adoption of digital tax models. Businesses operating there are not only required to submit a Nota Fiscal Electronica (or NF-e) form every time a taxable transaction takes place—they are required to electronically submit all of their transactional accounting information to the authorities for review. And the OECD’s Standard Audit File for Tax (SAF-T) has been in use for more than a decade in Europe. In 2020, Norway will join the existing six European markets that currently require their corporate taxpayers to abide by this international standard for electronic exchange of data with tax authorities. Other workstreams aimed at improving the digitization of tax authorities continue at the OECD level.

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Tax Authority Filing MandatesCountry Requirements Overview (as at August 2018)

Austria• SAF-T applicable• Depends on requested

information• Upon request

Brazil• SPED system• Disclose full invoice details

before obtaining valid invoice number

• On a regular basis

Portugal• SAF-T applicable• GL, supplier andcustomer

info, tax table, invoices, product tables

• Both monthly anduponrequest

Spain• Spanish SII implemented

in 2017

Lithuania• SAF-T applicable (i.SAF) for VAT invoices (issued and received), also

additional customs information, i.e. i.VAZ for the submission of data on consignment and other goods documents.On a regular basis since 1 October 2016

Poland• SAF-T applicable (JPK) since 1 July 2016• Monthly submission of VAT ledger• Several other files upon request (bank

statements, warehouse info, comprehensive GL info) to be available upon requestChina

• Golden Tax system• Disclose full invoice detailsbefore

obtaining valid invoicenumber• No SAF-T or e-audit

Czech Republic• Comprehensive

invoice details due with every taxreturn

• No e-audit

Norway• SAF-T financial data currently

optional. It will becomemandatory upon request from January 2020

Netherlands• SAF-T applicable (XAF)• Financial GL data• Optional regime

Germany• SAF-T applicable (GoBD)• Depending on thescope

of audit• Upon request

Kazakhstan• SAF-T expected in 2019• On a voluntary basis

Russia• Comprehensive invoice details filed

with VAT return

SouthAfrica• ‘IT14SD’

reconciliation of return to ledgers for Income Tax, VAT, PAYE, andCustoms

UK• ‘Making Tax Digital’ (MTD)• Digitization of taxsubmissions• VAT only from April 2019

France• Reduced SAF-T applicable• Data of statutory accounting• Upon request

Luxembourg• SAF-T applicable• OECD SAF-T based: GL, invoices,

payments,customers, suppliers, tax table

• Upon request

United Arab Emirates• Introduction of the

FAF file expected

Italy• Quarterly VAT reporting e-

submission forinvoices received and issued

Malaysia• GST audit file (GAF)• Upon request

Romania• SAF-T- not applicable• E-audit- not applicable, but,based on

the law, it is an option further to be implemented

• RTR- mandatory for large taxpayers,optional for the rest

Slovenia• Standardized file used for

electronic tax data in general• Used in tax audit andsimilar

procedures• Upon request

Singapore• Simplified SAF-T: IRAS Audit File (IAF)• Upon request

Australia• E-audit introducedrecently

but upon request• No SAF-TIndonesia

• E-invoice mandatory• No SAF-T or E-audit

Hungary• Data export function

on invoicing softwaresince 1 January2016

• Online connection established between invoice invoicingsoftware and the tax authorities’ system as of 1 July 2017

• Submission ofelectronicinvoice details from1 July 2018

This map highlights key country requirements for SAF-T, e-audit and real-time reporting requirements.

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Internal Challenges

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New Challenges, New Tools

CloudCloud is a kind of computing that uses scalable, elastic technology to deliver services over the Internet. Instead of making large investments up front, finance can get the full stack of finance functionality “as-a-service,” delivered through public, private, or hybrid clouds.

Advanced analyticsAnalytics has long been part of the finance arsenal, but new techniques are helping business people tackle the crunchy questions with insightful answers. Often that means combing through big data to see patternsthat suggest future opportunities.

Process roboticsProcess robotics automates transaction processing and communication across multiple technology systems. Robots perform recurring processes just like humans, but with less risk of errors

and fatigue.

Cognitive computingCognitive computing and artificial intelligence (AI) simulate human thinking. This technology includes machine learning, natural language processing, speech recognition, and computer vision.

VisualizationVisualization refers to the innovative use of images and interactive technologyto explore large, high-density data sets. Visualization suites complement business intelligence and analytics platforms, offering rich graphics, interactivity, and usability on par with leading consumer experiences.

In-memory computingIn-memory computing refers tostoring data in main memory to get faster response times. And because the data is compressed, storage requirements are reduced. The result? Speed and access to quantities of data that were previously unimaginable.

BlockchainBlockchain is a digital distributed ledger, where transactions are verified and securely stored on a network ofdistributed and connected nodes, without a governing central authority.

Core modernization

Exponentials

Digital tools designed to deliver new and different capabilities to finance

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Tax TransformationThe role of the tax executive is changing…CFOs have new expectations

Planning

Reduce global tax burden and enhance

cash flow

Managing

Within an appropriate risk framework

Reporting

Comply with reporting

obligations

Optimizing the tax

function for greater

impact

Strategic partnering across the

organization

Process, technology, and data

Tax has insufficient knowledge of how to leverage process and technology to access data for efficiency and effectiveness

People

Tax resources are viewed as overpriced and under-deployed; Tax has inadequate succession planning compared with the rest of the finance organization

Sustainability and efficiency

Constantly work to drive down the cost of the client’s global tax function

Business partnering

Build relationships across the organization to understand and gain alignment with the overall business strategy

Clear communication

Articulation of tax strategy and the value of tax concepts to a non-tax audience is a key skill for the Tax Executive

Leading strategic initiatives

Lead projects across functions that align with the company’s vision, while maintaining line of sight throughout the organization

Tax & finance profile

Traditional role Emerging additional expectations

Derived from Deloitte stakeholder interviews, including over 50 CFOs, in preparation for Deloitte Tax Executive Transition Labs.

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The Expanding Role of Tax Executives

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Future of tax organization design frameworkSix steps to define the roadmap

Art of thepossible

Vision Work Workforce Workplace Roadmap

How are digital disruptors

transforming Tax and

Finance? Why should we

care?

What are our goals &

aspirations?

How can we optimize the

way work gets done?

What skills do we need?

How do we enable our

organization?

How do we implement?

Awareness & Burning

Platform for Change

Vision for the Future Tax

Organization

Opportunities to Optimize/ Automate Operating

Model

Skills Gap Assessment Strategies to Achieve Skill

Goals

Culture of Collaboration

Digital Leadership

Prioritized Initiatives High-Level Business

CaseOb

ject

ive

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Tax Digital Framework

Cognitive intelligence & machine learningExplore the potential forexponential value-addthrough cognitive intelligencedriven applications such asmachine learning and natural language processing.

Business partneringBuild relationships across theorganization and embed tax inkey aspects of the business toadvise on transactions proactively and real-time.

Robotics process automation (RPA)Automate remaining manual processsteps—like data extraction, manipulation, reconciliation, and forms completion—by replicating repetitive tasks with software, adding digital labor to your headcount.

Tax decision rulesEliminate manual tax decisionsand standardize system logicto mitigate risk of inaccurate payments and reporting.

Data wrangling & analyticsLeverage data wrangling andvisualization tools to organize andcombine data, to provide a foundation for analytics and visualizations that can enable smarter decision making in real time.

Process/role simplificationSimplify processes, leveraginga single tax portal for supporttickets, access control, andend-to-end functionality thatsimplifies multiple clicks and supports standardization.

Data managementLeverage finance technology—

or separate technology if needed—as a data hub for tax to provide asingle source of truth, eliminate

manual data requests, and mitigate risks of inconsistent data across tax processes.

Tax DigitalFramework

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Future Tax Department – Data

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Data Trends

Data problems hide beneath the surface for many CFOs, some of whom don’t fully appreciate the heavy lifting required to fulfill their requests. That’s partly because the problems involve technical issues, and partly because there’s little motivation for people to elevate the problems to the corner office. No one wants to be the bearer of bad tidings.

Automation and cognitive will make it easier to get the work done, but it’s still going to be hard and tedious.

What to do• Articulate all Tax Department Data Requirements to

the Finance Function

• Convene a data summit with your finance technology team and those responsible for master data management. Ask for a review of the quality of data needed for critical business analysis.

• Identify areas where there’s a pressing need for improvement. You may not really care about this now, but when you eventually do care (and you will), you’re going to care a whole lot.

• Identify where there are tax planning opportunities if data could be obtained at a more granular or cleaner manner

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Optimized Tax Management System

Financial data Data management

End userControl centerApplicationsFinance and Tax data model

TM1SAP,

Oracle,JDE, etc.

MasterdataOther

Non-financial data

IRINielsen

OtherSurveys& data collects

Dat

a D

isco

very

& M

app

ingData

collection templates

Data integration platform

Surveytemplates

Tax calendar

Directcompliance

AuditManagement

Knowledgesocial

Operationdata

TaxReporting

Provision Insurance

Entity management

Tax provision

Direct income tax

Treasury

Insurance

Advanced analytic& predictive models

Corp Fin Reporting

Mobile analytics

Ad-hoc reports

Multi-dimensional

Dashboards

Workflows

Knowledge/social

Businessexecutive

Manager

Casual user

Community

Master/ GL data

Master/ Business

data

Direct compliance/provision

Tax calendar

Operationaldata

Stat account process

Indirect taxes

Audit Management

Knowledge/social

Transfer pricing

Knowledgemanagement

Formsframework

Search & versioning

Data management

Documentmanagement

& emails

Tracker & notes

Data collection/

surveys

Dashboards Analytics

Security

Workflow

Master Data

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Future Tax Department – Value and Needs

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Workforce and workplace

Employees will be doing new things in new ways, some of which will make CFOs uncomfortable.

Finance talent models are evolving quickly, with a premium placed on data scientists, business analysts, and storytellers.

This represents a dramatic shift for many finance organizations. To get ready, make sure your new hires represent the future

you’re striving for. Important qualities include a strong customer service orientation, flexibility, and good collaboration skills—

in addition to the technical capabilities needed for specific jobs. Also, all of your people should be able to contribute to

elevating the value of Finance in terms of communication, impact, and influence. Make every new hire count.

Work

With rule-based work largely automated, the focus shifts to business-facing analysis and exception-based investigations. More time will be spent on proactive support. Tools like predictive modeling, self-service reporting, and digital assistants enhance the capacity for employees to provide more advice on strategic interventions.

Workforce

The workforce of the future will bristle with cross- functional teams and constant collaboration. Finance organizations will need their people to be more flexible and open than they’ve ever been. Data scientists will work alongside business analysts to solve problems no individual could solve alone.

Everyone will need more technical literacy,just as everyone will need a customer-service mindset.

Workplace

As the finance workplace evolves to embracemore self-service, expect to see digital assistants filling in where analysts used to operate. This technology will serve both customers of Finance and workers in Finance with new tools that make it easier to get information and make sense of it. This shift will elevate the importance of visualization, as well as tools to keep people well-connected. Ironically, the future may require more physical proximity for teams, especially in theearly phases of projects and work planning.

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Digital tax department of the futureNew professional skills and training are required

Tax professional skills Past Future

Tax technical

Global project management

Data management

Technology application

Process optimization

People change management

Consultative business

Priority

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Skills requirements are changingSpecifically, tax organizations are looking for skills related to leveraging digital technologies and analyzing data

Analytical Digital technologies/ automation

Core business skills

Continuous (process)

improvement

Risk management

LeadershipTalent

Other skills

Top-3 targeted skills

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Future Tax Department – Operation Models

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Operating model

What to do

• Formulate strategies for automation, cognitive, and blockchain over the next five to seven years.

• Identify how productivity improvements will be shared. Insist on being dealt into the game on automation upside.

• Use scenario planning to figure out how technology will affect choices about what work should be done where and by whom, including potentially not within the Tax Department.

Companies may see significant disruption in the offshoring and outsourcing space, with individual suppliers and their capabilities looking quite different than they do today. At the same time, the need to build dynamic, cross-functional teams will strain finance organizations that aren’t preparing now for what’s ahead. As with all changes, good leaders will be essential for navigating these transitions.

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Outsourcing trends in the marketplace

Percentage of respondents planning to maintain or increase their level of outsourcing

IT Finance Procurement

74%

87%92%

52%

88%

39%

89%

43%

92%

56%

Planning to maintain or increase level of outsourcingCurrently outsourcing

Tax HR

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Evaluate operating models aligned with the strategic visionUsing the value matric to unlock insights

Non-Strategic, Non-Value Strategic, Value-Added

• Industry-specific knowledge applied to business

• Transaction planning and related matters

• Tax audit management

• Transfer pricing policies

• FIN 48 calculations and related management

• Section 404 compliance activities

• Day-to-day inquiries from the business

• Tax strategy

• Tax planning and related activities

• Tax accounting processes

• Business unit specific tax planning matters

• Understanding new business units and establishing tax profiles

• Interface with businesses and financial reporting

Focus on unique non-value items Focus on company knowledge

• Routine Income and Franchise tax compliance

• Transactional tax compliance activities

• Non-US Local country tax compliance processes (indirect and direct tax, VAT)

• Tax depreciation calculations

• Selected routine data management tasks

• Supporting activities for tax audits

• Special projects requiring specialized tax knowledge/higher risk positions

• Credit studies e.g. R&D credit or state credits

• Tax accounting and filing methods reviews

• Technology selection and implementation projects

• Transfer pricing documentation activities

• Controversy matters – assistance with unique items

• Digest Tax Reform and apply to tax compliance and consulting

Focus on efficiency and quality Focus on specialists

Nee

d f

or

Co

mp

any

Kn

ow

led

ge

Value to Company

Retain In-house

Potential for Cosourcing

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Final thoughts

Much of tax in the past has been defined by the steps required toproduce forms and reports themselves: collecting data, performing calculations, constructing reports / form, and disseminating them. That’s changing. In a digital world, process flows, dashboards and digital technology will do a lot of that work, which means humans get to do more interesting things.

Some of those are things you’ll want your best people

working on. Bringing insights to the business. Creating

effective stories about what information might mean to

different audiences.

Ensuring that the quality and accuracy of your company’s

data are superior.

Keep these things in mind. They’re important. Don’t let

yourself get caught up in technology bells and whistles.

The Tax Function isn’t all about about technology. It’s

about understanding information and making more

effective decisions. New tools may take some of the

tedious and repetitive work out of reporting processes,

but there is an indispensable role for human intelligence.

Make sure your people know that.

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