The New Reality for Corporate Tax
What the market is telling us:
•
•
The new realities of tax
Why tax needs to change
Introducing the Five Key Challenges:
•
CFO Research Study
• Why they matter
• The inevitable outcome
Understanding the issues:
•
Creating the connected tax department
• Finding the cause, not the symptom
• Adding certainty to uncertainty
• Focusing on the important and not the urgent
The New Reality for Corporate Tax
Today’s tax leaders face a new
reality as they guide and manage
their tax function:
•
Globalization and growth through acquisition
•
The toughest regulatory landscape in years
•
Auditors now expect to find assessments
•
Increased accountability and responsibility
•
Pressure to deliver more with fewer
resources
•
Increased accuracy, reduced uncertainty
•
Compliance is no longer enough
Research Validates Key Challenges
In a 2007 CFO Research Services
survey commissioned by Ryan, senior
corporate finance and tax executives
identified five key challenges that
were barriers to success:
Alignment – Does tax matter to the
organization and its leaders?
Complexity – Greater than ever
Resources – Top talent is tough to
attract and hard to retain
Risk management – Ability to focus
on the right things
Data integrity – Confidence in taxrelated business systems
Key Challenge: Lack of Alignment
Research indicates there is a
lack of alignment between the tax
function, tax leaders, and those
who define their success:
The C-Suite – Is tax viewed as essential
and integral to the strategic direction of
the organization?
Finance Leadership – Is tax feeding into
the objectives and metrics that measure
and track success and performance?
Lack of Alignment with C-Level Priorities
7 of 10
tax respondents devote most of their
resources to compliance while the finance
executive’s top priority is reducing the
company’s overall tax liabilities
Lack of Alignment with Finance Function
87%
of finance executives believe the tax
function should be more tightly integrated
with the rest of the finance function
Key Challenge: Increasing Demands
and Complexities
Research indicates that the scope
and complexity of the demands on
the tax function impact its ability to
align and focus on the strategic
activities that matter to the C-Suite:
Regulatory compliance – How do you
engineer certainty and repeatability into
a world as uncertain as the world of tax?
Globalization – There’s no one size fits
all in the world of global taxation.
Priorities and perspectives vary greatly
by country.
Increased Regulatory Compliance
9 of 10
tax executives are faced with
challenges in managing increased
regulatory compliance activities
Increased Global Activity
83%
of tax executives are faced with
increased complexities due to changing
overseas business activity
Key Challenge: Reduced Resources
Research shows that tax leaders are
feeling pressure to do more with
fewer resources and are finding it
tough to attract and retain the quality
of talent they need to be successful:
Talent Management – Will you attract
the caliber of talent that can make a
difference if you think and act as a
compliance-driven tax function?
Investment/Budget – Will you be able
to attract the investment you need to
develop and grow your tax function if
your organization perceives tax to be a
non-strategic compliance function?
Talent Management Concerns
88%
of tax professionals indicate that
improving talent management is a
priority over the next 2 years
Significant Budget and
Resource Constraints
8 of 10
tax executives face significant constraints
in time, budget, and resources, severely
restricting their ability to strategically
realign their focus
Key Challenge: Mitigating Risk
Research confirms that the
measurement and mitigation of
tax and business risk in the ultratransparent post Sarbanes-Oxley
world is a top priority of the C-Suite:
Mitigating Business Risk – With
transaction tax comprising such a
significant component of corporate risk
and cash flow, it is critical that the tax
function actively participate in the risk
mitigation initiatives
Avoiding Financial Statement Errors –
Striking the right balance between the
big picture and the minutiae — strategic
thinkers must also focus on detail and
accuracy
Mitigating Business Risks
only 17%
of finance executives rate their tax
department as excellent in mitigating
business risks
Avoiding Financial Statement Errors
7 of 10
finance executives believe the tax
function needs to improve their ability to
avoid errors in financial statements
Key Challenge: Data Integrity
Research indicates that
decentralized, redundant, and
unreliable data is inhibiting the ability
of the tax function to operate as
efficiently and effectively as the
C-Suite demands:
Tax System Limitations – How heavy is
your tax department’s reliance on manual
processes and data management? Are
you trying to use good people to make
the most of bad processes?
Financial System Limitations –
Do limitations in your current financial
systems hinder your performance as a
tax function?
Tax Systems Limitations
81%
of tax professionals indicate a need to
drive improvements in their processes
and systems for storing, analyzing,
and retrieving tax data
Financial Systems Limitations
77%
of companies believe limitations in their
current financial systems will present
and create challenges for the tax
department in the near future
An Inevitable Outcome:
The Low-Value Loop
High-value activities are giving way
to low-value demands, leading to a
focus on the urgent rather than the
important, and the misalignment of
priorities and resources:
Lack of Strategic Alignment – Increased
requirements and reduced resources are
driving the tax department to focus on
urgent rather than strategic activities
Lack of Organizational Credibility –
When the focus is on low-value activities
how does that impact the corporate
perception of the tax department?
Low-Value Loop:
Lack of Strategic Involvement
9 of 10
finance executives indicate the need
for increased tax involvement in
planning and policy matters
Low-Value Loop:
Lack of Organizational Credibility
Less
than
50%
of tax respondents believe they have
the requisite organizational credibility
to be effective
The Bottom Line
Tax leaders that fail to see the
value they create, fail to think big,
and fail to think differently are
more likely to:
•
Fail to align with the things that truly matter
•
Fail to understand the criteria for success
•
Have a limited internal voice
•
Limit their ability to increase resources
•
Have a limited impact and visibility in the
organization
•
Have low perceived value and productivity
A Better Approach:
Tax Competency Center
Leveraging experience and best
practices to transform the tax
department into the Tax
Competency Center:
•
Understanding where you are and where
you need to be
•
Creating the framework and roadmap for
tax success
•
Creating a culture dedicated to continuous
improvement
•
Making tax truly matter to your organization
Driving Better Performance Through
Best Practices
Tax leaders who pursue a best
practices approach:
•
Benchmark and build a case for
transformational change
•
Understand and align with the success
measures of key stakeholders
•
Shift the focus to high-value activities and
outsource or automate low-value activities
•
Develop a strong communication plan for
exchanging information and celebrating
success
•
Hire and retain talent who share the
proper mindset
Driving Better Performance Through
Best Practices
Transformation starts with
benchmarking and the
identification of best practices:
•
Benchmark your current performance
•
Identify best practices in relation to peer
and historical performance
•
Measure the delta between your reality
and your potential
•
Justify financial and human resource
investment through the development of an
ROI-based business case
•
Develop a culture of performance
measurement
Driving Better Performance Through
Best Practices
Prioritize and implement change
efforts in alignment with key
stakeholder objectives:
•
Develop evaluation criteria for the
prioritization of improvement opportunities
such as:
–
Stakeholder objectives
–
Current corporate initiatives
–
Impact potential
•
Implement change initiatives with
reasonable expectations
•
Implement change initiatives at a
reasonable pace
Driving Better Performance Through
Best Practices
Focus on high-value activities and
outsource or automate low-value
activities:
•
•
Benefits of focusing on high-value activities:
–
Maximize corporate value
–
Apply knowledge of business intricacies
–
Promote talent retention and development
Benefits of outsourcing or automating
low-value activities:
–
Creates availability of departmental
resources for higher-value activities
–
Improves the efficiency of your work effort
–
Embeds expert functional knowledge in
repetitive activities
Driving Better Performance Through
Best Practices
Implement a successful
communication plan:
•
•
Highlights of plan components:
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Solicit regular feedback from stakeholders
for perceptions and measurement of tax
department performance
–
Invest in understanding the changing
needs and objectives of stakeholders
–
Communicate departmental goals and
prioritize transformation initiatives
–
Publish progress of transformation efforts
Benefits of effective communication:
–
Broader ownership of tax department
efforts
–
Improved overall approach through
increased participation in plan
–
Greater appreciation for the tax
department’s contribution
Driving Better Performance Through
Best Practices
Hire and retain top talent by
offering existing staff and future
candidates a more desirable
career path and experience:
•
A best practice focused function improves
departmental culture
•
A focus on higher-value activities improves
the ability to offer current and potential
employees a more desirable career path
and experience
•
A more strategic department offers broader
exposure to the overall business operations
•
A tax department recognized for delivering
greater organizational value is involved at a
higher level in the decision-making and
planning process
How Many of the Five Challenges
Apply to You?
1.
How confident are you in the quality of the
policies, practices, systems, and processes
in place at your organization?
2.
Do you have confidence in your
organization’s ability to focus on the areas
that you know need improvement?
3.
Are you confident that your department is
working in alignment with its internal
partners and has a greater voice and
influence as a consequence?
4.
Do you have confidence in your ability to not
only add real business value, but do it in a
way which is highly visible within the
organization?
5.
Are you confident that your company knows
about the tax department’s true performance
and values the contributions made?
Moving Beyond the Status Quo
Today’s tax leaders face two choices:
• Do nothing: Do you create or perpetuate
the low-value loop?
• Do something: Can the right
reaction lead to the right outcome?
You can make the choice that makes the
difference
You can transform your role and empower
your team
You can be able to make sure you and your
team matter
Some of the world’s most
successful companies are starting
to see and believe that they can!
Please Call With Comments or Questions
G. Brint Ryan
Managing Principal
Ryan
Three Galleria Tower
13155 Noel Road
Suite 100
Dallas, Texas
972 934 0022
brint.ryan@ryanco.com