Commerce and technology are evolving in tandem at breakneck speed. In just the last 10 years, digital platforms have exploded causing transaction taxes including VAT and sales tax to become more complex.
In some instances, there weren’t even domestic or international provisions in place to capture this new way of buying. The landmark Wayfair decision cleared up some of the confusion over nexus, but also caused a lot of hand wringing over how jurisdictions would interpret and implement the new rules.
This is all to say that we’re living in one of the most tumultuous times in modern tax history. Companies must be prepared for anything and that makes it difficult to build a good tax team.
What will the ideal tax department of the future look like? It’s tough to say, but any company focusing on the two major shifts outlined below can rest assured that their tax department will be positioned to stay nimble, efficient and more compliant.
Changing Roles
Planning, reporting, compliance and auditing have always been the major functions of tax departments. But that’s evolving.
Tax professionals perform a vastly different job than they did even a decade ago and, in the future, the shift in duties will be even more significant. As the focus on collecting data and reporting becomes more efficient due to digitization and automation, the next generation of tax pros need to be more knowledgeable and innovative, taking on new strategic tasks.
Ideally, this means tearing down siloed tax departments. With automation taking over data management and other repetitive processes, tax experts will be able to focus on advisory roles that can be better integrated into a company’s overall strategy.
Not only is the job description morphing, but the knowledge base is changing as well.
There isn’t a graduate today with an accounting degree that hasn’t been exposed to technology. Because of this, companies should be hiring emerging tax talent with a technology-focused skillset, as well as inspiring the current roster in their tax departments to embrace this evolving mindset.
The Impact of Technology
Businesses are in a tricky spot right now with technology. Even those who want to embrace machine learning and automation to take care of data collection and reporting must deal with the gap between legacy tech and advanced solutions. But in the future as these legacy systems are taken offline, organizations will be able to rely on emerging technology, especially when it comes to end-to-end solutions. Companies, whether they’re big enterprises or small businesses, will need to utilize an end-to-end solution to keep up with the ever-expanding taxing jurisdictions around the world.
A good solution will be fueled by a content database that includes data driven rules that map to every tax jurisdiction. These databases need to be continually updated by the technology vendor to keep up with changes in the more than 19,000 global tax jurisdictions.
End-to-end technology provides a full pipeline of tax services from tax determination to compliance and reporting. Beyond that, it should be able to pull insights from the data that help businesses optimize their tax processes.
For smaller and mid-market businesses, these kinds of tools can make a big difference by allowing non-tax professionals to focus on the bigger strategy around running their companies instead of trying to collect and report sales tax themselves.
When the World Wide Web opened for commercial use in 1991, no one could have predicted that 30 years later global e-commerce would bring in $26.7 trillion in sales. And along with those transactions came a drastically more complex global tax system.
By focusing on the shifting responsibilities of the tax workforce along with the integration of tax technology, businesses can plan for the tax department of the future.
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Michael Bernard is Vice President of Tax Content and Chief Tax Officer at Vertex Inc.
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Tags: Advisory, Firm Management, Sales Tax, Technology
