European CEOs and tax leaders are transforming their tax
departments through technology to support broader organizational
goals, according to KPMG's latest Global Tax Department
Benchmarking Survey.
LONDON, June 20, 2019 /PRNewswire/ -- Launched at
this week's 2019 KPMG EMA Region Tax Summit in London, the report on the changing roles and
responsibilities of tax departments holds some interesting
parallels with the findings of KPMG's Global CEO Outlook, released
(RC)in May. Together, the two reports show the opportunity for tax
leaders to leave behind their operational roots and become a more
strategic partner to the CEO.
Barriers to growth
According to the 2019 KPMG Global CEO Outlook less than 1
percent of CEOs in Europe
identified tax risk as a barrier to growth. Mindful of this
potential 'blind spot' among chief execs, tax leaders have a
responsibility to remind them that while they may be relaxed about
the impact of tax risk on their growth plans, the most commonly
identified barriers to growth will all have tax implications: the
return to territorialism (18 percent of CEOs), emerging and
disruptive technologies (18 percent) and environmental and climate
change (17 percent).
"It is vital that tax leaders are informing their CEOs about the
risks relating to tax in these areas and across the business," said
Jane McCormick, Global Head
of Tax & Legal, KPMG International. "Today's tax leaders need
to be able to speak to their CEOs about tax in a compelling way
that goes well beyond providing technical expertise and compliance
oversight. Organizations need their tax leaders to step up as
overall strategic thinkers for the business and its reputational
goals, going beyond their traditional responsibilities."
Transforming the tax department
CEOs are showing a healthy appetite for innovation, and KPMG's
tax research suggests that tax leaders in Europe and around the world are primed to
support their plans by driving transformational change. Using
technology to improve processes, exploring outsourcing and
co-sourcing opportunities to gain efficiencies, and investing in
new skills for their workforce are three areas of particular focus
for tax departments.
About half of respondents expect a moderate increase in their
use of co-source resources from tax providers (49 percent) and
finance Shared Services Centers (52 percent). Almost as many
respondents (43 percent) plan to increase their use of centers of
excellence for key functions such as transfer pricing and
transaction support.
While these kinds of operational changes are in line with the
types of innovation CEOs are seeking, there may still be a
disparity between what tax leaders are seeing and their CEOs'
awareness of the complexities, risks and opportunities relating to
today's tax environment and the tax function itself.
Tax leaders of the future
The tax benchmarking survey also shows some emerging shifts in
how tax leaders in Europe see
themselves and their ability to add value within their
organizations. In addition to helping their leadership teams and
boards navigate the demands of today's tax environment, the survey
suggests tax leaders recognize the need to develop new skillsets
within their departments in order to help deliver more value in
ways that reflect their evolving roles as business leaders and the
changing needs of their organizations. Alongside this call to
expand the capabilities within their functions, tax departments in
the region continue to operate in a challenging environment, rife
with uncertainty. Adding to the challenges facing tax leaders is
the rapid growth in the development of digital strategies employed
by tax authorities.
"European tax authorities are leading the way in areas such as
real-time reporting and e-invoicing," said Chris Scott, Head of Tax for the KPMG EMA
Region. "This is going to require heads of tax—and their
organizations more generally—to reconsider the importance of
technology to tax, to tackle data challenges and to adapt and
develop their tax practices and processes for today's realities.
They also have to rethink what good performance means in this new
world. If you're traditionally judged by the timeliness of your tax
return, this means little in relation to where the true risk might
lie when data is sent in real time. Instead, the measures will
become more about factors such as data integrity, coherence and
completeness."
This observation seems to align with what CEOs indicated as the
top performance measure for tax departments, namely:
- Tax function is aligned to support the corporate strategy (14
percent)
- Tax risks are managed appropriately in line with organizational
values and objectives (13 percent)
- Results of tax jurisdiction audits are as expected (13
percent)
- Tax function effectively manages its department's resources (13
percent)
- Tax function generates cash savings for organization (13
percent)
- Tax compliance deadlines are met on schedule (12
percent)
- Business units are satisfied with tax services provided (12
percent)
- Accuracy of returns and avoidance of penalties (10
percent)
These findings suggest that CEOs are expecting strategic,
broadly focused tax leadership, going beyond the traditional realm
of compliance activities. In contrast, when tax leaders were asked
to rank the same criteria above in terms of how they expect
leadership would prioritize the tax department's performance
measures, the clear frontrunners were around the effective
management of tax risks (54 percent ranked this as highly
important), and the accuracy of returns and avoidance of penalties
(43 percent ranked this as highly important).
Using data driven insights
Document management systems are currently the most commonly used
type of tax software. Almost a fifth (19 percent) of companies that
now use it plan to change or enhance their current software, while
a similar number (21 percent) of other companies plan to acquire
document management software in the next 5 years. Compliance
software, off-the-shelf provision systems and workflow tools are
the next most commonly used software. However, there appears to be
little enthusiasm to change tools or increase usage among current
users of these technologies.
"Many tax leaders in the region today are better equipped to
deliver more data-driven insights to their organizations than they
ever have been in the past, but there is still more that can be
done," said Melissa
Geiger, Partner and Head of International Tax for KPMG
in the UK. "They can go further by bringing their experience in
evolving the tax function for real-time data collection to help
other areas of the business do the same. This is one way tax
professionals can take more of a leadership role in helping their
organizations overcome the broader business challenges they
face."
In the short term, tax leaders in Europe may continue to struggle to balance
compliance imperatives with broader business priorities, including
enhanced data analysis, effective reputational management and
better risk mitigation. However, emerging trends suggest the
transformational work that tax leaders are beginning to take on
today, investing in technology and improved processes, fostering
new skillsets and continuing to pursue a place for tax at the
leadership table, could yield meaningful opportunities in the
longer term. The result will be a more efficient, more engaged tax
function—creating a richer experience for the modern tax
professional and eliciting further trust from the organizations and
broader societies that they serve.
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Background
About the KPMG Global Tax Department Benchmarking Survey
KPMG International's ongoing Global Tax Benchmarking initiative
charts the evolution of leading tax departments and identifies
operational benchmarks for high-performing tax teams. The ongoing
study is the largest of its kind on a global scale. It has so far
surveyed nearly 500 tax leaders from some of the world's largest
multinational organizations. The European data cut and related
report, which is the focus of this particular release, includes 190
tax leaders representing more than 15 different countries in the
European region. The European report looks at responses from 190
tax leaders of organizations in 15 European countries across all
major industries. Learn more at kpmg.com/taxbenchmarking.
About KPMG's Global CEO Outlook
Now in its fifth year, the KPMG Global CEO Outlook provides an
in-depth three-year outlook from thousands of global executives on
enterprise and economic growth. Each year the report builds upon
answers from previous surveys to help ensure a consistent
year-over-year view of the global economy. It also includes new and
changing questions to capture CEOs' outlook on trending topics in
the market.
The 2019 survey covers 1,300 CEOs in 11 key markets
(Australia, China, France, Germany, India, Italy,
Japan, Netherlands, Spain, UK and US) and 11 key industry sectors
(asset management, automotive, banking, consumer and retail,
energy, infrastructure, insurance, life sciences, manufacturing,
technology, and telecommunications).
The cuts of data presented in this press release are the
responses of 880 CEOs in 18 countries in Europe (Croatia, Cyprus, Czech
Republic, Denmark,
Finland, France, Germany, Greece, Italy, Luxembourg, Netherlands, Norway, Republic of
Ireland, Portugal,
Spain, Sweden, Turkey and the UK).
The survey was conducted between 8 January and 20 February 2019. NOTE: some figures may not add
up to 100 percent due to rounding. Learn more at
kpmg.com/ceooutlook.
About the KPMG EMA Tax Summit
The KPMG EMA Tax Summit is an annual invitation-only event held
in different locations across Europe, which brings together tax leaders from
some of the largest and most influential organizations around the
world with KPMG Tax & Legal professionals from across the KPMG
network of member firms.
About KPMG
KPMG is a global network of professional services firms
providing Audit, Tax and Advisory services. We operate in 153
countries and territories and have 207,000 people working in member
firms around the world. The independent member firms of the KPMG
network are affiliated with KPMG International Cooperative ("KPMG
International"), a Swiss entity. Each KPMG firm is a legally
distinct and separate entity and describes itself as such.
For further information: Amy
Diaz, KPMG International, amydiaz@kpmg.ca, +1 416 356
6930