Greg Engel, Vice President of Tax at KPMG, oversees a team of more than 10,000 tax professionals and partners across a wide range of tax disciplines, including federal, international, state, local and specialty practices. The views are those of the author.
The tax profession is on the cusp of a major transformation. However, a majority of C-suites leaders seem to be missing opportunities to create real value by not leveraging tax data or exploit the technology to its full potential.
This is particularly evident in the wake of the significant fiscal and climate reforms brought about by the new Inflation Reduction Act (IRA) and ongoing negotiations in the Organization for Economic Co-operation and Development (OECD) overhaul global tax policy. These evolutionary changes provide businesses with the perfect opportunity to use their data model and plan scenarios, forecast tax rates, assess whether they are eligible for climate credits, and prepare for possible tax audits. Failure to use tax data in these ways limit an organization’s ability to add value and, worse, put the organization at risk of being abandoned behind.
Data: the next tax frontier
This week, KPMG released the findings of its annual report, “Tax Reimagined: Perspectives from the C-suite,” which surveyed 300 C-suite executives at companies totaling over $1 billion in revenue. The survey explores the evolution of the tax profession and reveals the ingredients necessary to be competitive in the 21st century, such as the ability to organize, analyze and synthesize the data.
In our 2021 edition of the Tax Reimagined survey of executives, 73% of rrespondents admitted that their organizations did not know how to use tax data in a forward-looking context. way. A year later, there has been no consistent or sufficient progress. In 2022, while the the majority of our respondents said they often leverage tax data to navigate critical cases activities, we found that few leaders actually did it. For example, 52% of respondents said they did not use their data to plan scenarios around tax policy changes; 64% do not leverage tax data to align with ESG strategy; and 64% are not leverage tax data to identify tax credits. Here are some examples of areas where many taxes departments could leverage their tax data to bring greater value to their organizations and drive their bottom lines.
Who manages the data engine?
So why aren’t companies doing more to mine the diamonds found in tax data? A company data is both large and complex, and they need tax talent with the right skills and tools to use this data in a meaningful way. Typically, corporate tax services are very lean and return on investment (ROI) because investing extra dollars in emerging tax technologies is not worth it. This is why leaders should consider a managed services approach, working with companies that specialize in data management strategies, technology and taxation.
Another solution to the problem is for leaders to identify the skills gaps that exist internally and invest in developing their talents. Leaders need to consider whether they are hiring and train individuals capable of pushing the profession to modernize. Our survey found many leaders expressing recruitment and retention difficulties, and 53% indicating recruitment of new talent with the right skill set as the main challenge. In addition, 70% of respondents said cloud, D&A, analytics, and visualization tools are most relevant to their tax talent know and use. That said, we continue to see executives prefer to hire tax professionals who can learn technology rather than technologists who could learn taxation.
The C Suite Competitive Advantage
As tax services and their organizations face increasing complexity and rapid change challenges, they need to understand that tax data is both powerful and predictive. And if harnessed correctly, this data can help leaders see around the corner and make a positive statement impact on the management of the whole organization. I am convinced that the tax services capable of capitalizing on the hidden gems found in their tax data will be the ones who win the race in the market.
