As MNE’s begin to process the implications of tax reform, tax strategy and the risks associated continue to climb up the agenda- a repercussion has led to the subject matter appearing in the boardroom. The role of a Head of Tax has taken on a new meaning as the traditional business environment continues to evolve.
The introduction of technology led solutions has caused disruption. Intelligent enterprise evolution requires a huge amount of change management which tends to be led by the CFO and provides opportunity to transform. With next generation technologies, tax teams will have a whole new level of trust and confidence that their data is up-to-date and accurate, placing even more accountability on the CFOs shoulders.
CFOs reported that the fallout from ‘Tax reform’ is leading them to strengthen or restructure their tax functions. Given the complexity of implementing new regimes and communicating its implications, CFOs are expecting a degree of accountability.
Having surveyed CFOs from FTSE listed businesses to SME’s, below are the top 7 expectations that are placed on the tax leadership team:
Communication that translates tax into an understandable language
Beyond the regular tone and pitch, a study conducted by Morgan McKinley showed that CFO’s want their Heads of Tax to be effective and concise communicators. With a wider remit across the finance department, a deep technical understanding of tax issues may not be realistic but CFO’s find it essential to have an appreciation of the tax value proposition so they can adequately communicate it across the organisation and to the board.
These conversations allow for a stronger allegiance between the Tax and wider Finance department and allow for the CFO to be an internal and external advocate for tax.
Effective Risk Mitigation
As CFOs take an increasing role in managing operational risk, they are looking to their Tax teams to understand how tax deliberations integrate into the broader business decision making process and approach to managing risk. In addition, CFOs are looking to Heads of Tax to manage the risks associated with the tax regulatory landscape and ensuring that the team skillset is able to support the increasing demand on both Compliance, Reporting and Transparency measures.
CFOs are depending on Heads of Tax to ensure they deploy the right people across the respective discipline, particularly when considering reporting standard to manage the developing Tax regulatory climate. CFOs also want to ensure that reporting lines are clear and that the tax structure ensures a solid flow of risk information to the rest of the business.
Strong Partnership with CFO and other C-Suite Leaders
With accountability from a tax department rising in light of SAO, CFOs increasingly want a Head of Tax who can partner with them and other leaders across the business. As tax is thrust into the spotlight with MNE’s being held accountable by worldwide authorities, CFOs have begun to look to tax leadership to shape company strategy and educate the organisation on what tax does and why it is so important- hence a rise in independent tax bodies and forums across the market.
Adaptation of Tax Technology
Over the last 18 months, tax technology continues to become a large agenda point for tax departments. CFOs are feeling the pressure of reducing costs in the form of headcount across finance and therefore want to be encouraged that Heads of Tax are effectively and efficiently using technology as a potential solution.
Tax Department Transformation
As tax continues to develop in 2019 with the introduction of varying degrees of reform measures from Taxing the Digital world to Making Tax digital, CFOs are looking to restructure their tax function to ensure that they are fit for purpose. Pressure is mounting for tax departments to expand in scope and impact as their organisations cope with competition, globalisation and technologies amidst stricter tax regulations. Responding to these demands involves a shift in how work is performed and the prioritisation of issues from tax leadership. This has bought a change in alignment of tax strategy with business and strategic goals.
Strong Talent Development/Succession Planning
Within a tax department, threats to retention can put the organisation at risk from a compliance and commercial perspective. CFOs want to know that the future of the tax function is stable and therefore appointing a succession plan as a Head of Tax has become more crucial than ever.
The tax environment poses many challenges and threats but also a huge amount of opportunity for tax teams and Heads of Tax to make a difference and boost their own internal and external profile. While CFO’s continue to hope for a ‘no surprises’ counterpart in the form of a Head of Tax, it’s inevitable in the course of the developing regulatory environment for new issues to be issued into the realm. That said, the expectations on a Head of Tax in this current climate continue to be one who can both partner commercially and technically with the wider business as we head into the end of 2019.
Ektaa Kumar is head of tax interim at Morgan McKinley