What's Happening?
Corporate tax departments are experiencing significant resource challenges, with over half of them being under-resourced, according to a report by the Thomson Reuters Institute. This lack of resources has led to increased reliance on external support
and higher penalties. The report highlights that 58% of tax departments are under-resourced, and 59% lack confidence in upgrading their tax technology in the next two years. The current operating model, which often involves overtime and reactive outsourcing, is proving inadequate. The report suggests a hybrid model that combines in-house expertise, targeted external support, and a coherent tech/AI stack to shift focus from compliance to strategic planning.
Why It's Important?
The challenges faced by corporate tax departments have broader implications for businesses. Under-resourced departments are more likely to incur penalties and have less confidence in their forecasting abilities, which can affect financial planning and decision-making. The proposed hybrid model aims to address these issues by optimizing resource allocation and leveraging technology. This approach could lead to more efficient tax operations, reduced penalties, and improved strategic planning. Businesses that adopt this model may gain a competitive advantage by being better prepared for regulatory changes and economic shifts.
What's Next?
For tax departments, the next steps involve transitioning to the proposed hybrid model. This includes investing in technology and skills, automating routine tasks, and treating external providers as capability partners. Departments that successfully implement this model are expected to allocate more time for proactive work and improve their forecasting accuracy. Smaller companies and large corporations are already leading the way by securing leadership buy-in and leveraging external expertise. Midsize companies, however, may need to adjust their cautious approach to avoid falling behind.
Beyond the Headlines
The shift to a hybrid model in corporate tax departments reflects a broader trend towards digital transformation and strategic resource management. This change not only addresses immediate operational challenges but also positions tax departments as strategic partners within organizations. By focusing on proactive planning and value creation, tax departments can play a crucial role in shaping business strategies and responding to regulatory changes. The integration of AI and automation further enhances this capability, allowing departments to handle complex tasks more efficiently.
