“The tax function of 2025 will be stretched in many directions,” according to Grant Wardell-Johnson, Leader of KPMG’s Australian Tax Centre. “Of primary concern will be preservation of the company’s reputation in the media, with civil society and investment analysts. This requires a clear and articulate narrative.”
Wardell-Johnson made his forecast before a room packed with tax professionals at Tax 2025: the tax function of the future, the final event of Wolters Kluwer Knowledge Week 2016.
Wardell-Johnson’s presentation covered seven key topics: Enframing the future; Technology; Changing values; Shape of the Economy; The future tax base: Administration of tax; and The tax function.
As illuminating and informative as it was entertaining, Wardell-Johnson’s talk highlighted the challenges and opportunities for today’s – and tomorrow’s – tax professionals.
He identified seven key trends that will affect the tax function of the future:
- Tax functions will require multiple new skills
Strong communication skills will be needed in order to present a company’s tax narrative effectively. Skills in data analytics and technology will also be highly valued, with many medium size tax functions employing dedicated IT specialists. The increasing complexity of transfer pricing may mean the future tax function will need economic analysis capability too.
The ability to negotiate, resolve disputes and navigate complex interactions across multiple jurisdictions with many stakeholders will be critical and therefore highly rewarded.
- The rise of artificial intelligence and automation for compliance
Artificial intelligence is increasingly likely to be used for tasks such as the preparation of tax returns and will also lead to greater opportunities for outsourcing compliance functions. This will free up staff for greater value-added activities and will provide added protection in higher scrutiny environments.
- Tax functions will face multiple judgement dilemmas
Future tax functions are likely to face more, and more complex, dilemmas that require balancing the interests of larger numbers of stakeholders, often in environments of substantial technical complexity. Good judgement will be essential in the tax leaders (and advisors) of the future. Such leaders must be able to take account of current options and consequences and of how they will be judged in five years time. “This will be as true in 2025 as it is now,” says Wardell-Johnson.
- High level of tax transparency with intense community focus
Transparency will drive more demands on the tax function.
“It will need to provide relatively clear and simple answers to complex issues, often in an antagonistic environment where the questioner fails to appreciate nuances and is ready to draw inappropriate conclusions. An investment through a low tax jurisdiction, for instance, will need to be explained in detail even though it is fully justified on commercial grounds,” says Wardell-Johnson.
- Greater number of taxable foreign country touch points
“There is likely to be a proliferation of presences that a MNE will have in different jurisdictions as a result of the expanded concept of permanent establishment recommended by the OECD, the rise of new taxes (such as the Indian Equalisation Levy) and the globalisation of business,” says Wardell-Johnson.
Specialist outsourcing services may develop to help manage these cost-effectively.
- Data analytics provide substantial insights
By 2025, sophisticated methods of data analysis will be readily available. These will be used to mitigate the risk of errors, provide a framework for negotiating the challenge of revenue authorities, and develop strategies for optimisation of supply chains, debt and equity funding.
They will also help identify ways to ensure revenue moves in the most efficient way from the place it is generated to where it is needed.
- Rise of tax as a path for broad commercial insights
The tax function of the future will deliver greater commercial value by providing broader non-tax insights as well as tax intelligence. The most talented tax professionals will use this to their, and their employer’s, advantage.
Grant Wardell-Johnson presented Tax 2025: the tax function of the future at Wolters Kluwer Knowledge Week 2016 in partnership with KPMG. If you would like to find out more about Tax 2025, click here.