EY Survey: Tax Transformation a ‘Must’

Person using technology on a computer

More than eight out of 10 companies are currently transforming their tax and finance operating model, according to EY’s 2022 Tax and Finance Operations Survey. That is an eye-opening figure and one that supports EY’s point that tax transformation “is not necessarily a ‘need’ or ‘want’ anymore, but a ‘must.’”

Transformation is a broad term that requires some fleshing out. An important point that I’ve heard Vertex thought leaders emphasize consistently in the past year is that the design and execution of tax transformation differ based on a tax function’s unique structure, the business strategy that the tax function aligns with, and the compliance complexities it addresses. 

While the way tax transformation efforts are structured and managed differ according to each tax group and company’s unique needs, EY’s survey of 1,653 global executives (whose companies operate in a total of 12 different industries and 42 tax jurisdictions) highlights two widespread dynamics that double as drivers of, and benefits from, tax transformation:  

  • Tax groups are becoming more strategic: The survey indicates that 95% of participating organizations plan to reallocate some of their tax and finance budgets away from “routine” processes (those primarily focused on tax compliance) to “strategic” activities (including tax policy, planning and controversy, and scenario planning) during the next 24 months. “Tax leaders have undeniably taken on a more significant role as trusted advisers to the C-suite,” asserts EY Global Vice Chair – Tax Kate Barton. “Businesses that have begun transforming their tax functions are seeing the biggest dividends.”
  • Advanced tax automation is pivotal: Seven in 10 survey respondents report that their companies plan to invest an average of $2 million or more in advanced tax technology in the coming 36 months. What is more, 85% of respondents in the largest companies (those with $30 billion or more in annual revenues) intend to invest $2 million or more in tax technology in the coming years – and nearly half of these companies plan to invest more than $4 million in new tax automation.

Other consulting and software firms that help companies transform their tax operating models are conducting similar surveys and research reports. A Deloitte survey report asserts that tax functions need to “free up resources and transform their technology infrastructure” to deliver on their mission. BDO reports that the rest of the business increasingly expects tax functions to demonstrate “digital sophistication.”

While tax transformation initiatives remain unique, there is growing consensus that they qualify as a requirement in most organizations. There is also a widespread acknowledgement of the fact that – as the EY report puts it – “the importance of having advanced technology cannot be understated.” 

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Larry Mellon, Tax Directory, Vertex Inc

Larry Mellon

Tax Director, Chief Tax Office

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Larry Mellon is a Tax Director in the Chief Tax Office, where he is responsible for providing insights, thought leadership and customer-centric direction to Vertex functional groups, supporting the continued expansion of Vertex indirect tax solutions and overall enterprise strategy. He has over 30 years of experience in sales and use tax compliance, risk assessment, jurisdictional audits, administration and management, as well as VAT compliance. Larry joined Vertex in 2005 as a Sales and Income Tax Supervisor and has served as Tax Manager since 2012, where he has played a pivotal role in elevating and advancing the company’s tax management offerings.

Prior to joining Vertex, Larry served as a Senior Tax Accountant and Property Tax Manager at Foamex International, Inc., a polyurethane and advanced polymer foam product manufacturer and marketer. Mellon also held multiple roles at The Franklin Mint and is a member of the Institute of Professionals in Taxation (IPT) and Tax Executives Institute (TEI).