The uproar and uncertainty surrounding U.S. tax reform is mounting.
The op-eds of well-known business publications feature more and more calls (and proposals) for tax reform. And it seems clear that the issue will play a pivotal role our presidential elections next year. Related arguments about lagging U.S. business competiveness, “fairness,” and tax-code complexity also compete for our attention.
The expression “tax-aware” describes companies that have made substantial progress integrating their tax function into strategic business decision-making.
CFOs and other finance executives at tax-aware companies recently reported that greater integration of tax information into business activities results in significant bottom-line benefits, including improved financial performance and higher earnings per share (EPS). These and other findings are part of a research report – based on surveys of, interviews with, 105 senior finance executives – prepared by CFO Publishing in conjunction with Vertex
I attended two conferences recently centered on cloud-related technology improvements. Strata + Hadoop World, which takes place in Silicon Valley, covers the latest developments and concepts related to big data and data science. Five years ago, the conference drew roughly 500 attendees. This year, it attracted more than 5,500 people, including some of the world’s leading cloud thinkers and some of the world’s biggest leaders.
Like every other function in the company, tax departments are hearing and thinking a lot more about the cloud right now.
These thoughts and discussions will not let up any time soon, and they may never stop, asserts Tax Analysts editor Cara Griffith. “Businesses aren’t just implementing cloud computing as an add-on to their current business technology strategy,” Griffith writes in an article she contributed to Forbes, “they’re changing their technology strategies to use cloud computing.”
Early in my career I had the opportunity to live and work in Waterloo, Belgium. Napoleon famously met his end there when two adversaries, the Anglo-allied army and the Prussian army, coordinated attacks from both sides. Caught in the cross fire, he and his army were doomed. It's starting to feel like Waterloo for multinational tax departments; caught in the cross fire between corporate-wide cost saving initiatives and global requirements for increased transparency.
A couple of years ago, I was introduced to the tax director of a casket manufacture at a Vertex Exchange conference. I couldn’t resist asking, “Death and taxes?” The gentleman responded with a polite laugh, one that suggested he had heard the question more than once.
Taxes are often identified as one of life's certainties, but that old saying doesn’t offer what is to be done about them. Many of my colleagues and our clients are wondering in the current environment of hyper-regulation what does it cost to get it right?
In late 2014, online retail giant Amazon showed how innovative the industry is becoming by announcing plans to open its first brick-and-mortar store in New York. In early 2015 at the National Retail Foundation’s (NRF’s) 104th Annual Convention & EXPO, Staples Executive Vice President of Global E-Commerce, Faisal Masud, confirmed that innovation has become a necessity: “You don’t have a choice,” he asserted. “You need to innovate.”
Judging from the ideas, insights and innovations rippling through the presentations and discussions at this month’s NRF event in New York, the retail industry is in the throes of transformation. These changes promise to create more complexity for retail tax functions, which will need to operate with greater agility in response.
Pssst…want to know the secret to thriving as a tax professional? Become a “Tax IT Whisperer.”
More corporate tax functions are clamoring for this competency, which enables tax functions to communicate their rapidly growing technology needs to overburdened information technology (IT) functions.
The Tax IT Whisperer skill is a “next-generation” tax competency that rising leaders need to apply as pressure intensifies for their functions to become more proactive and less reactive. A Tax IT Whisperer has the ability to understand the technology implications of tax and have the ability to translate this need to IT. There is a growing demand for Tax IT Whisperers according to the corporate tax executives I've spoken to in the last year.
As expected, late last week the Organisation for Economic Cooperation and Development (OECD) released discussion drafts of two additional sections of its VAT/GST Guidelines, the initial version of which was published earlier this year. The purpose of the document is to lay out guiding principles for any country looking to introduce a VAT or GST system and, for those that already have one, to help provide a pathway to best practices, including the avoidance of double taxation and non-taxation.
“This is happening.”
That line describes an important narrative from the 14th annual International Tax Review and TPWeek Global Transfer Pricing Forum I attended in Washington D.C. recently. The event, organized in association with Deloitte, identified several important steps tax professionals should consider as they contend with “this” –the G20 and OECD’s Base Erosion and Profit Sharing (BEPS) project.
And it is indeed happening: In mid-September, the OECD published the final version of its “Guidance on Transfer Pricing Documentation and Country-by-Country Reporting” (CBCR). This documentation and reporting template is designed to be used by multinational companies (MNCs) to report income, taxes paid, and other indicators of economic activity, and it was included among the seven action plan recommendations that are part of BEPS.
The recent Gartner Symposium/ITxpo tackled how digital business is redefining the role of the information technology (IT) function. There also was a deeper message at the core of most of the presentations that applies much more broadly: Digital business is disrupting all corporate functions. This includes tax functions. And the way tax and other functions redefine themselves in response to this digital disruption will go a long way toward determining the extent to which they lead or lag behind in the coming years.
Gartner offered up an impressive list of speakers including, Microsoft CEO Satya Nadella, Apple Co-Founder Steve Wozniak, Lyft Co-Founder and President John Zimmer, and Peter Thiel, the technology entrepreneur, investor and author.
A Consumer Reports article shared the consumer-research organization’s comprehensive “owner-cost” calculations for cars. The article debates depreciation, fuel costs, insurance, maintenance and repair. This approach is similar to comparing the "total cost of ownership" for tax compliance outsourcing.
When tax executives weigh the option of outsourcing returns, they typically compare the cost of managing the returns in-house vs. the outsourcing fee. As they should, of course. But it is also important to ask whether these cost estimates are comprehensive.
The regulatory drive for greater tax transparency has been intensifying, but what’s new is the rapidly increasing influence and speed of non-regulatory criticism of corporate tax management decisions and practices.
Detailed tax information is now immediately available to almost anyone at the click of a mouse or the swipe of a smart phone screen. Those doing all of this clicking and swiping -- non-regulatory groups and individuals – have emerged as influential critics of tax management practices. Just look at how non-regulatory criticism of “tax inversion” practices attracted the attention of U.S. legislators.
What is it that Vertex shares with Netflix and Zappos? At our core we believe in enabling people to feel a greater sense of meaning, purpose and satisfaction at work. This in turn serves to drive innovation and performance. Gallup’s 2013 State of the American Workplace study reinforces this by revealing, “the 30 million engaged employees in the U.S. come up with most of the innovative ideas, create most of a company’s new customers, and have the most entrepreneurial energy.”
This data (and plenty of other research like it) shows that the way a company fosters its organizational culture and relates to its employees can serve as a competitive differentiator. That’s what we believe at Vertex, and we’re not alone.
Whether you’re a bed and breakfast, an online travel agency (OTA) or a hotel chain, accurate tax calculation is critical. While these calculations have always been complex, the ramifications of non-compliance have never been higher.
Companies in the hospitality industry -- especially hotels and other lodging businesses – face intense challenges in light of a spike in litigation over lodging and occupancy taxes. Headlines from business pages and digital publications throughout the country demonstrate this surge:
Recently, I attended the Association of Consumer Vehicle Lessors (ACVL) annual conference in New Orleans, where many of the country’s leading vehicle lessors met to discuss numerous business topics, including tax.
One discussion in particular, a panel on sales and use tax returns outsourcing, really got me thinking.
They were discussing the hiring of temporary staff to manage sales & use tax returns. Given my own particular focus on outsourcing, I admittedly have a bias against the “hiring of temps” approach.
Thanks to social media, communications and technology advances and the public's insatiable appetite for information, sensationalizing corporate tax-planning activities has become a favorite pastime of the news media, activist groups and politicians.
Never mind that these legal tax-planning activities are performed for the purpose of increasing shareholder value (and employee value). Campaigns of “tax shaming” are carried out by a growing throng of paparazzi that post “exposés” online and in print. Tax transparency demands are no longer just in the realm of regulators and taxing authorities.
One of the leading issues faced by companies requiring significant amounts of global tax research data is the associated business expense. This is mainly because few supplier organizations have the geographic reach to provide such diverse and specialized information.
There is now optimism however around potential solutions to this issue, largely based on the exponential growth of online tax communities.
These social media networks present interesting possibilities as far as tax discussion is concerned. Is it only a short leap from there to an online marketplace for, among other things, tax data either as a commodity or in terms of online advisory services?
First, SAP. Now IBM.
The consistent message from my recent travels to two of the industry’s most influential technology conferences is that forward-looking CFOs are moving their financial operations to cloud-based models.
That in and of itself is not big news and you might be tempted to take a “wait and see” approach.
During both the ERP and web eras, tax was typically one of the last functions to adopt technology and didn’t receive much attention until the core systems were in place.
What I am seeing today is vastly different. Here’s why.
Very few tax professionals would argue that the role of tax in financial management doesn't receive as much attention as it should. However, that may not be the case for much longer.
Imagine a single technology platform in which a global company’s entire tax processing is performed according to a set of standardized processes … delivering unprecedented levels of transparency, governance and control.
This may sound like a pipe dream, right? That’s exactly why it’s remarkable that a small, but growing collection of well-known global enterprises not only think that this type of automation-enabled standardization is possible, but are moving in this direction.
There is little doubt that government initiatives like the OECD’s Baseline Erosion and Profit Sharing Action Plan (BEPS) will continue to greatly complicate existing tax data management challenges.
In my previous post, I discussed several of the primary challenges that confront retail tax functions. Tax automation can help address these challenges while delivering confidence that requirements are being met, as well as establishing a foundation for more efficient and effective compliance and reducing audit exposure.
However, not all tax automation solutions can address the growing magnitude and complexity of the tax issues within the quickly changing retail industry. To find a uniquely equipped solution that meets these challenges, it helps to ask questions in the following categories:
• Scope and Scale: Does the solution address multiple points of sale for a diverse range of products and services?
That’s roughly how many legislative changes have occurred around the world regarding tax in the past 12 months – and that is just in the area of transaction taxes.
As staggering as this number is, think about the fact that corporate income tax; payroll taxes; customs and excise duties; environmental taxes; and other relevant fiscal changes are not included. Clearly, we’ve plunged into an era of hyper-regulation in which the speed and volume of global tax rate and rules changes continue to accelerate and are now starting to outpace companies' ability to remain in compliance.
“Unprecedented disruption and change” is the phrase that a Deloitte report uses to describe the current state of the retail industry. This extraordinary period of retail-industry disturbance is giving rise to new tax challenges, which in turn are motivating more tax functions to invest in automation to achieve greater efficiencies and free up tax professionals to engage in more valuable activities.
As this occurs, there is a growing sense among retailers that not all tax automation solutions are created equal. To find the right tax automation solution, it helps to understand the nature of the industry’s tax challenges as well as the types of questions that enable tax and information technology (IT) executives to identify a solution that can help meet their needs...
As I mentioned in a previous post, there is a growing need to recruit and develop future tax leaders. That post focused on useful recruiting practices; here, I will discuss development practices.
Most tax functions conduct a variety of technical training sessions. These programs, which typically include in-house tax seminars, are highly valuable. Many tax executives and managers also actively encourage tax professionals to become members of a professional tax organization – such as TEI, IFA, or COST—and, in some cases, to pursue advanced degrees, such as an M.S. in taxation. It is equally important, of course, for tax leaders to provide their staffs with the time necessary to participate in professional organizations and/or to further their education...
The Business Roundtable (BRT) is an influential association of chief executive officers from leading U.S. companies that promotes sound public policy and a thriving U.S. economy. So, when BRT weighs in on a legislative, policy or regulatory matter, we tend to listen.
And when the Roundtable expresses pointed concerns about a significant global tax regulatory change – as it did on May 30 – we pay very close attention.
In a concise letter to U.S. Secretary of the Treasury Jacob Lew, Business Roundtable’s Louis Chênevert conveyed his association’s concerns about the OECD Base Erosion and Profit Shifting (BEPS) project. In addition to serving as the chair of the BRT’s tax and fiscal policy committee, Chênevert is the chairman and CEO of United Technologies Corporation...
At first glance, the process of selecting a sales and use tax returns outsourcing provider may appear complicated. The nature and quality of service these outsourcers deliver varies, often in important ways. Some outsourcers are true “partners;” others are little more than a collection of temp workers.
A closer look suggests that the selection process can be more straightforward – and more effective – when companies apply many of the same principles to selecting an outsourcing partner that they’ve traditionally used when hiring a new employee.
It is helpful to evaluate prospective outsourcing providers as if they were an extension of your tax staff. While this approach requires rigor, the evaluation criteria it involves will sound familiar to anyone who has hired...
Transfer pricing remains a major risk to companies around the world. In fact, it was the top tax risk identified by the 800-plus global tax and finance executives who participated in EY’s 2014 survey on Tax Risk. The growing complexity of worldwide transfer pricing rules continues to present a three dimensional challenge for multinational companies ("MNCs") with respect to documentation requirements, transparency initiatives and audits. Scrutiny of a company's transfer pricing is not only limited to tax authorities, but also now comes from the media and other activists and NGO's.
To address this ever evolving risk, it helps for tax professionals of MNCs to focus in on the following:
1) Documentation: If intercompany transactions are to withstand scrutiny, companies...
Former IBM CEO Sam Palmisano puts several interesting questions to business leaders in his new e-book, “Re-Think: A Path to the Future.” Similar questions also face leaders of tax functions. Here’s one passage that got me thinking:
Today, global economic integration presents enormous opportunity for the future of business and society. And while many point to the risks of this integration, the more pressing and more pragmatic questions to me are the following: How do we deal with the future? Do we embrace it? Or do we cling to the past?
Palmisano knows a thing or two about what it takes to prepare a business for a more global future. Palmisano served as chairman, president and chief executive officer of IBM, where he worked for 39 years of his career. In his book,...
Never before has the trustworthiness of our global corporations been more important to the global economy, to the public who invests in these global companies, and to the regulators who oversee our businesses. And never before has there been so little trust in our global institutions – both government and business – and our institutional leaders, according to the 2014 Edelman Trust Barometer survey report.
I’m concerned that trust has become a major challenge for many companies and their stakeholders. While there were some bright spots in this research (the technology industry once again figures as the most trustworthy business sector), many of the results are disappointing. When investors don’t have confidence in business leaders or their companies, regulators tend...
Lately, we’ve been hearing a lot about cloud computing and technology transformation. A recent SAP conference I attended gave me the sense that genuine transformation is beginning to impact at the very core of companies. These changes will also have significant implications on tax functions.
This impact was evident at SAP’s “Financials 2014” conference in Orlando. The event focused on SAP’s technology and, more specifically, the migration of the company’s solutions to SAP’s new HANA platform and the cloud. However, a larger theme regarding technology transformation also was apparent in many of the presentations and offline discussions
As we talk to tax executives across the U.S. about sales and use tax returns outsourcing, we’ve found there are a number of misconceptions that prevent companies from considering this option. Understanding the truth about the issues and the marketplace offerings will prove that returns outsourcing can be a valuable alternative for a tax department.
Myth #1: Outsourcing providers don’t perform as well as in-house staff.
Not true. Their singular focus can make them even more efficient than in-house staff that can sometimes get pulled away on other projects.
The Organization for Economic Co-operation and Development’s (OECD’s) Action Plan on Base Erosion and Profit Sharing (“the BEPS Action Plan”) outlines 15 specific compliance requirements. One of these requirements, the country-by-country reporting (CBCR) template, will add new challenges and additional complexity to what many tax executives currently identify as their function’s toughest data management issue: the disconnect between financial reporting systems and the required income tax reporting process.
The CBCR requirement calls for multinational companies (MNCs) to report their income, taxes paid, and other indicators of economic activity on a country-by-country basis through the use of a common template.
In my previous post, I described the growing need for tax functions to take a cue from CIOs in order to effectively plan for a digital future. To use the research firm Gartner’s language, this approach requires addressing the “safe and steady” demands of system or record IT as well as operating in a “faster, more agile, nonlinear mode” for systems of differentiation. Other research on the IT function’s current evolution supports and builds upon the need for IT to enable a data-driven culture and strengthening its strategic contributions to the organization.
Although most of this research currently focuses on the IT function, my sense is that it could just as easily apply to tax functions.
The best way to understand and learn about Tax is from tax people themselves. You know “straight from the horse’s mouth” so to speak. That’s why we have added a Chief Tax Office at Vertex and staffed it with former executives and subject matter experts across tax types.
In fact, two of Vertex’s most valuable sources of tax intelligence, Chris Walsh and Bernadette Pinamont, recently published an article in the London-based International Tax Review (ITR), as part of a featured monthly column.
Chief information officers (CIOs) and their information technology (IT) functions are feeling overwhelmed these days. Understanding the source of this frustration can equip chief tax officers (CTOs) and their tax functions with some practical and valuable guidance.
A recent survey by IT research firm Gartner indicates that “many CIOs feel overwhelmed by the prospect of building digital leadership, while renovating the core of IT infrastructure and capability for the digital future.”
In one of The Wall Street Journal’s recent “CFO Journal” articles, Deloitte Tax LLP Partner Jacien Steele identifies five important questions CFOs should ask their tax executives. According to Steele, "With turnover in tax leadership projected to increase due to retirements and the competitive market demand, CFOs should engage with tax in order to enhance tax literacy and develop future tax leaders."
Steele’s question is spot-on, timely and centers on talent management. Manpower’s global talent-shortage research indicates that finance and accounting staff positions (which includes the job title - tax professional) once again ranks as one of the top five most difficult jobs to fill in 2013 – as they were in both 2012 and 2011.
We hear a lot about “ongoing economic uncertainty” these days, but there’s at least one economic certainty for companies with international operations: global audit activity will continue to increase.
Nearly three-quarters (73 percent) of global chief financial officers report that tax audits, across all aspects of tax, increased in frequency last year, according to a recent Taxand survey, with transfer pricing audits leading the way. The aggressiveness of the audits and related assessments has also surged, particularly in emerging economies; just look at the well-publicized Vodafone and Shell transfer pricing cases in India.
“Chaos was the law of nature; order was the dream of man.”
― Henry Adams, U.S. Historian
Adams’ description of chaos appears in his book, “The Education of Henry Adams,” which he wrote a century ago to describe his attempt to come to terms with the start of the 20th century, a period of rapid change and turmoil. The quote also crystalizes the experience of many tax professionals at the dawn of the 21st Century as they try to make sense of the chaotic jumble of tax-enforcement approaches and increasing use of general anti-avoidance regulations (GAARs) that vary dramatically – and confusingly – from country to country.
This month’s 2014 Oracle HCM conference was inspirational and reassuring.
The inspiration came from learning about innovative practices related to attracting, developing and retaining talent; boosting employee productivity and employee engagement; and addressing the talent crunch that affects all of us – tax executives, HR executives and just about every other company leader.
And it was encouraging to hear some of the world’s top business leaders frame talent management as one of the most formidable challenges CEOs in all industries will need to address in the next few years.
“We need quality people – and lots of them,” Oracle President Mark Hurd said in his keynote address. “That’s a challenge that keeps you up at night.”
What is keeping corporate tax professionals awake at night?
We put that question to most of the roughly 600 tax folks who attended our annual Exchange Conference. Here are the biggest challenges, according to nearly 400 survey respondents, currently confronting tax departments:
1. he ability to obtain timely and accurate data (35 percent);
2. Having to do more with less (32 percent);
3. Reporting and analytics (16 percent);
4. Audit defense (14 percent); and
5. Record retention (3 percent)
These results, while eye-opening, are not surprising. For years, tax practitioners have been calling for improved data management capabilities.
There are bricks, and then there are Bricks...
Have you heard the old tale about the woman walking down the street who comes upon a man hunched over on the ground, apparently doing some work? She asks the man, "What is that you are doing?" The man replies, "Laying a brick." Curious, she sees another man, apparently laying another brick, and again pauses to ask, "What are you doing?" This man, doing the same work as the first, replies that he is "building a wall." A few dozen feet further down the street the woman comes to a third man, laying a brick in the same manner as the first two. She asks the third man, "What are you doing?" To which he replies, "Building a Cathedral."
Our purpose gives our work meaning and significance.
If you've ever driven on an icy road and started to slide, it helps to regain control by steering into the skid. While that guidance sounds counterintuitive, it happens to work quite well.
For many tax managers, the notion of outsourcing business functions and processes sounds a bit like sliding down a slick back road. And the last thing any tax professional wants to feel is a lack of control – of the process, the data and the decisions.
It might sound illogical, but the right outsourcing partner can actually help tax leaders improve their control – of the process, the data and the decisions. This point represents the key takeaway in a recent webcast with a Vertex Managed Services customer.
In my previous post, I described how some leading tax departments are addressing tax data management and achieving their improvement objectives. In this post, I want to share suggestions for how to build a good business case for changes in tax, in a way that strengthens your position internally during budget negotiations and externally for on-time and scope delivery of value from vendors.
I'm going to use a “factors analogy” and focus on the upstream processes around data to illustrate the concepts. However, the approach can be deployed in any area, compliance, provision, etc. First, it pays to be prepared.
At Vertex, we’re mindful of a troubling skills gap, particularly in the U.S. where there’s a growing need to develop science, technology, engineering and math (STEM) skills in students of all ages. The latest figures from Manpower’s ongoing talent-shortage survey indicates that 39 percent of U.S. employers currently experience difficulty filling jobs – despite relatively high levels of unemployment. The number one reason for this difficulty? A lack of technical competencies.
So I decided to see if we could address the need in our own back yard. First, it must be noted that I am a proud Penn State alumni.
In previous posts, I discussed common tax data management problems (the root cause of tax process inefficient and ineffectiveness) and related improvement goals. Now, I want to share how some leading tax departments are really addressing these problems and achieving their improvement objectives.
These approaches typically consist of two parts:
1. Recognizing the nature of the challenge; and
2. Taking several immediate steps to make progress on improving tax processes (which may include introducing greater automation to the tax data management lifecycle).
This post will cover the recognition part of the approach.
The reality is that there is no silver bullet fix.
Silicon Valley-based Ventana Research recently recognized Vertex® Enterprise in the category of Business Innovation for the Office of Finance in the technology research firm’s 2013 Technology Innovation Awards. While we are not big on publicizing accolades, this one is special.
Here is why.
First, Ventana Research is a leading niche analyst firm focused on business and information technology (IT). Ventana’s insights stem from extremely thorough, research-based benchmarking of people, processes, information and technology across the globe, and is highly regarded in the business and technology space.
Gartner's annual IT Expo is a great place to go if you want to be thrilled by possibility -- and terrified that the world might be passing you by.
Here's a statement from this year’s event that sticks with me: "Google is in the automotive business because they care about what you're going to do in your car when you don't have to drive it anymore." And you know what? Tax professionals should care about what Google is doing in our cars because this type of breakthrough promises to shift how we do our work.
Let's break that down for the sake of processing some pretty big ideas.
Google has entered into the automotive business with its driverless car technology initiative. (Here's some additional background if you're not familiar).
Many tax professionals have felt less in control and more disconnected in recent years – and for good reason.
First, as business ventures deeper into an era of hyper-regulation, the magnitude and complexity of tax-related rules intensifies. Ernst & Young’s aptly named “2011-2012 Tax Risk and Controversy Survey” report contained numerous alarming statistics, including this one: The volume of tax information exchange agreements, among different countries, has increased by more than 1,000 percent.
Since that report appeared, the OECD’s Base Erosion and Profit Shifting (BEPS) plan has taken shape.
When people ask me about the strategic alliance Vertex and Deloitte Tax entered recently, I reach for my dictionary.
“Alliance,” according to Merriam-Webster’s, means a “bond” or “connection.” That’s fitting: we’ve been connected with Deloitte for years, working side-by-side with their tax experts on numerous large Vertex implementations inside our customers’ organizations. We believe this relationship provides customers with the best tax expertise (Deloitte) and tax technology (Vertex) and our strategic alliance simply formalizes and deepens that longstanding connection.
Last week, I was reflecting on a conference presentation that I was lucky enough to hear earlier in the year. The speaker had some very interesting things to say about the social contract between tax authorities and tax payers. The essence of his point was that tax authorities have an obligation to assist tax payers in making the identification of their liabilities and the payment of their taxes as easy as is reasonably possible. In return, tax payers should remain compliant by accounting for, collecting and paying those taxes that they are required to manage.