New Year’s Resolution - Strategic Roadmap to Steer the Tax Function
Introduction
In the ever-evolving landscape of corporate governance, the tax function plays a pivotal role in ensuring compliance, optimizing financial performance, and supporting strategic business decisions. Developing a strategic roadmap for the tax function involves a comprehensive approach that integrates various elements and stakeholders within an organization. This article explores how tax leaders can navigate the strategic evolution of their organizations and mature the operating model through the implementation of a strategic framework. This framework elucidates the governance structure of the organization, assesses the performance of process owners, and clarifies the prioritization of objectives.
Strategic Roadmap Framework
Drawing on empirical evidence, we propose an exemplary strategic roadmap designed to empower tax leaders. This strategic roadmap delineates five critical priorities: Organization, Data Management, Technology, Internal Control and Risk Management, and People. Each priority is analyzed from two viewpoints, the as-is and the to-be, and requires a rating of maturity using levels: Basic, Developing, Established, Advanced, and Leading.
1. Organization
Optimizing the organizational structure and sourcing strategies is fundamental to the effectiveness of the tax function. Key questions to consider include:
How is the tax function organized to support business decisions and provide business partnering?
Are roles, accountabilities, responsibilities, and reporting lines clearly defined and communicated?
Is the approach to tax linked to the business and sustainable development strategies of the organization?
A well-structured tax organization ensures that tax considerations are integrated into business decisions, enhancing the overall strategic alignment and operational efficiency.
2. Data Management
Implementing robust data governance and analytics capabilities is crucial for maintaining quality, fit-for-purpose data for tax matters. Key questions to consider include:
What is the approach to maintaining quality data for tax matters?
How does the tax function manage digital tax administration compliance requirements?
Effective data management enables the tax function to leverage data analytics for better decision-making, compliance, and reporting.
3. Technology
Leveraging digital technologies to enhance operational efficiencies is a critical priority. Key questions to consider include:
What is the current software and level of automation used?
What is the level of tax-sensitized data in current systems?
Adopting advanced technologies and automation can significantly improve the efficiency and accuracy of tax processes, reducing the risk of errors and enhancing compliance.
4. Internal Control and Risk Management
Strengthening internal controls and mitigating risks is essential for a robust tax function. Key questions to consider include:
How are global tax processes and controls managed?
What mechanisms are in place to ensure compliance with evolving tax regulations and to address potential tax risks proactively?
A strong internal control environment ensures that tax risks are identified, assessed, and managed effectively, safeguarding the organization from potential financial and reputational damage.
5. People
Ensuring that the tax function is adequately staffed in terms of numbers, levels, and relevant skill sets is vital. Key questions to consider include:
Is the tax function adequately staffed?
Do the staff possess the necessary skills and expertise?
Investing in the development and retention of skilled tax professionals is crucial for the long-term success of the tax function.
Practical Application
The following figure (Figure 1) illustrates how we can apply the strategic roadmap to steer the tax organization. The priorities identified in this figure are illustrative and not exhaustive.
Figure 1 The Strategic Roadmap
The strategic roadmap provides a visual representation of the key priorities and their interrelationships, enabling tax leaders to identify areas of focus and track progress over time.
Benefits of the Strategic Roadmap
The integration of the strategic roadmap into the tax organization yields several benefits:
Enhanced Stakeholder Collaboration: The strategic roadmap fosters a collaborative environment with key stakeholders, facilitating open dialogue and alignment on tax-related matters.
Strategic Adaptability: The strategic roadmap equips tax leaders to navigate business uncertainties effectively, enabling them to adapt to changing regulatory and business environments.
Complexity Management: The strategic roadmap assists tax leaders in addressing the complexities of both internal and external environments, ensuring that the tax function remains agile and responsive.
In other words, the strategic roadmap not only stimulates strategic exploration through stakeholder dialogue but also establishes a comprehensive performance reporting philosophy. Consequently, the strategic roadmap aids in defining metrics to monitor tax function performance.
Continuous Improvement
It is crucial for tax leaders to avoid the pursuit of a perfect map, as the dynamic nature of contemporary business environments necessitates regular review and adjustments. Leaders should prioritize incremental improvements rather than attempting to resolve all issues simultaneously. Further, overloading the strategic roadmap with too many directions can obscure critical information and generate confusion among stakeholders.
Continuous improvement involves regularly reviewing and updating the strategic roadmap to reflect changes in the business environment, regulatory landscape, and organizational priorities. This iterative approach ensures that the tax function remains aligned with the overall business strategy and continues to add value.
Conclusion
In conclusion, the adoption of a strategic framework for tax organizations catalyzes constructive stakeholder dialogue, enhances the experience of tax area process owners, fosters stronger partnerships with corporate function leaders, and translates strategic imperatives into actionable steps. The strategic roadmap thus serves as an essential analytical tool, enabling tax leaders to identify key areas of focus, formulate pertinent questions, and interpret results effectively. By following this strategic roadmap, organizations can develop a robust and efficient tax function that not only ensures compliance but also adds value to the business.
The strategic roadmap provides a clear and structured approach to managing the tax function, enabling tax leaders to navigate the complexities of the modern business environment with confidence. By focusing on key priorities and continuously improving the strategic roadmap, tax leaders can ensure that their organizations remain compliant, efficient, and strategically aligned.
In summary, the strategic roadmap is a powerful tool that empowers tax leaders to steer their organizations towards success. By integrating the strategic roadmap into the tax function, organizations can achieve enhanced stakeholder collaboration, strategic adaptability, and effective complexity management. This, in turn, leads to a more robust and efficient tax function that supports the overall business strategy and drives long-term value.
