According to PwC’s ‘Tax Function of the Future’ study of more than 100 tax departments, risk management is the most important measure of tax function performance.
Surprisingly, less than two thirds (58%) of companies have Board or senior level sign off of their tax strategies. Companies which do are more likely to publish the strategy and review it on a frequent basis.
Mark Schofield, tax partner at PwC, said: “The costs of poor risk management can easily outweigh incremental changes in the effective tax rate. Public and political scrutiny on tax behaviour, resulting reforms to tax rules and changing attitudes of tax authorities and Governments are among the issues contributing towards a higher risk environment. It’s not just about the risk of paying too little tax, but equally the risk of being taxed twice. Businesses want stability and certainty on tax, so it’s no surprise that having a sustainable tax rate is also seen as important.”
As a result of this new and developing tax environment, the skills required of tax-focused professionals themselves are changing. 73% of respondents to the PwC survey say the need for good communication skills has increased, and is likely to increase again in the next five years.
There’s also an enhanced emphasis on attracting individuals with risk management and technical skills, with demand presently outstripping supply in the market.
Schofield added: “Tax today is attracting a different type of person than it did, say, 20 years ago. You cannot get away with just having an analytical mind. Making sure your stakeholders understand what the business is doing on tax, and importantly why, demands sound communication skills. This is particularly true given the complex nature of both the tax system and business models. Technology is also transforming tax functions, enabling businesses to respond to the increasing demands for data, with transparency very much front of mind.”
The ‘Tax Function of the Future’ study involved interviews with 107 heads of tax and tax advisors predominantly from multinationals and spanning a range of business sectors.