5 data strategies to optimize a tax department

October 15, 2021 10:59 AM

Even before COVID-19, unprecedented economic, regulatory, and social forces — including complex global trade regulations, advancements in accounting standards and global tax law developments — were pushing companies to rethink how they did business. The global pandemic made the need more urgent, exacerbating the challenges facing many tax teams. Budgets shrank, and corporations now face potential changes to their tax rates under a new administration.

KPMG recently surveyed hundreds of senior tax executives as part of its 2021 Tax Benchmarking Survey Report, revealing how tax functions manage technology and data and analytics. Based on the findings, KPMG identified five technology- and data-focused strategies that the C-suite should bet on to drive greater business value and maximize success; they're listed below.

In considering them, bear in mind that many tax leaders view technology implementation as a quick win: Buy a tool and plug it in. In reality, tax technology and data modernization is a journey. A well-planned journey enables successive quick wins to result in transformational change with sustainable value for a company.

But first, tax functions need to address root issues related to data and processes. A new tool or dashboard is not enough. Tax departments must be intentional, methodical and holistic in their approach to technology and data investments to see results and position themselves for future success.

With challenges often come great opportunities, and the possibilities are vast for tax professionals to reimagine the function through technology and data transformation. Let’s place our bets with purpose and not rely solely on chance.

The holy grail of standardized data

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It all starts with standardized data. Accurate, well-structured data is the holy grail for every tax function. Without it, tax functions can’t operate effectively. Yet good data is still a major hurdle for many departments.

Why? Because tax professionals need a unique set of data from across the enterprise that’s not always available in broader accounting systems, and reconfiguring data to meet the needs of the tax department is usually an expensive undertaking that many organizations don’t prioritize.

But there’s hope. There are many emerging technologies that can help tax functions solve data issues. It’s imperative that chief tax officers invest in tax-specific data collection and transformation tools to streamline data management and organize disparate data to support the detail required for tax.

A data-driven strategy and culture equals a well-oiled tax department.

Adopt the cloud for greater effectiveness

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Since accurate and accessible data is central to both efficiency and effectiveness, many of the challenges that constrain tax departments can be solved by leveraging the process, systems and data integration provided by cloud transformation. Large cloud platform providers are significantly enhancing tax executives’ access to data and analytics — and at a lower cost. Organizations are increasingly rolling out or upgrading to cloud-based enterprise resource planning systems, which presents a unique opportunity for tax teams to optimize data and processes by clarifying tax specifications to work with new business systems.

Embrace intelligent automation

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As tax functions come under pressure to reduce costs, the focus is shifting toward emerging technologies — particularly intelligent automation. IA offers powerful benefits for tax functions, saving time and money while allowing tax professionals to focus on higher-level strategic tasks. Embedding IA capabilities such as cognitive capability, machine learning, and enhanced vision, speech and language not only drives efficiency by mimicking manual steps previously executed by staff but can also help tax functions bridge process and analytic gaps to drive greater effectiveness.

Turn predictive modeling into insights

Valuable tax functions do not look at data just through a rearview mirror but also use technology to turn data into forward-looking insights. Few tax functions are using data and analytics to understand why something happened, predict what could happen next, and decide what actions to take.

Improved data analysis also helps organizations to make decisions that align to the tax strategy while simultaneously providing greater transparency and reporting — an easy win for companies hoping to improve their ESG profiles. It may take time for companies to build foundational processes and centralize data for tax consumption. But only then can they realize the full capabilities of data tools and move to next-level data analysis to make predictions, drive decision-making and manage risk.

Explore managed services

While many tax functions are exploring IA, actual implementation is low. The business case for change requires an evaluation of ROI, cost of ownership and ability to support the automation in-house. As a result, tax functions are exploring data tools, automation solutions and technology-enabled resources available from other vendors.

Research shows that tax professionals may spend up to 70% of their time manually gathering and organizing tax data. This is neither satisfying for trained tax technicians nor efficient for the business.

Data management as a service is an emerging need, especially for virtual collaboration and operation of multinational companies. Data management as a service allows tax functions to unbundle different parts of the data process, keeping only the most valuable data analysis activities in-house. The company’s tax professionals can then focus on what they were trained to do: apply their tax knowledge and extract insights to inform tax and business planning.