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?
I’ve worked with hundreds of Vertex clients over the past 15 years who have grappled with the cost-to-get-it-right question. Despite the certainty of taxes, many tax functions remain uncertain as to how best to develop a business case to justify process and technology changes to indeed, enable stronger corporate tax management.
A framework for analyzing the costs of current tax administration processes, potential risks, and unrealized opportunities can provide a lens through which to define and quantify the value of any tax optimization project.
Vertex client, Stewart & Stevenson created a business case using the following process and was able to save $1.8 million dollars:
- Document the current tax process: Comprehensively define and map the steps of the current process associated with each tax type and review these results to identify inefficiencies, gaps, or unrealized opportunities.
- Quantify the costs: Look for ways to quantify the cost of each step in the documented current process.
- Establish reduction factors: Consider how much costs could be reduced at each step if an optimized process were implemented.
- Create a concept model: Build a vision for a future state that incorporates the underlying requirements of the current approach along with the characteristics of an optimized tax process.
An intentional effort to evaluate the business case for tax optimization can provide a cost-effective way of “getting it right” while avoiding the risks of “business as usual.”
*The full story behind Stewart & Stevenson's success and how to create a solid business case is presented in more detail here.
Please remember that the Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information.