How Tax Teams can help fortify their businesses during periods of significant disruption

Yes, chaos. 

It’s not too strong a word to describe the incredible volatility and global economic shocks of the past few years. As businesses and their tax groups have contended with everything from trade wars and military wars, lockdowns, supply chain disruptions, inflationary surges and more. It’s by no means a stretch to state that tax leaders can play a key role in helping their organizations navigate safely through whatever turbulence lies ahead.

A recent Tax Executive article, Agents of Chaos: How Tax Leaders Are Adapting to Global Disruptions,  explains why tax teams are key to countering external disruptors and emerging complexities. The authors are Michael Bernard, Vertex’s Vice President of Tax Content and CTO of Transaction Tax, and myself.

In our era of overlapping global crises, businesses need to get better at thinking on their feet, and tax teams can help them achieve that.  Mike and I point out: “Many responses to the volatility of these pivots—such as pursuing mergers, consolidations, or divestitures or redesigning capital arrangements—now have more multifaceted tax compliance and cross-border audit implications that should be swiftly examined and then addressed with minimal friction.”

Here are three ways tax groups can fortify businesses against the agents of chaos:
1.    Transfer pricing. Inflation can distort transfer pricing models, especially when prices fluctuate more considerably between costs and profit centers and more frequently in some regions than in others. In low-inflation periods, tax departments might adjust transfer pricing models quarterly or even twice yearly. But in today’s environments, you may need to shift to every other month or even more frequently. This is essential because transactional analysis and indirect taxation, has played a significant role in transfer pricing compliance.
2.    Automation. Many tax organizations are implementing innovative tax engines, particularly to support sales tax and VAT, and automating data flows for tax reporting. This will help them meet the increasing demand for tax planning and analysis, as well as supporting tax leaders’ involvement in strategic planning in today’s highly dynamic business environments. It can also help tax professionals spend less time on routine tasks and more time expanding their strategic contribution.  
3.    Talent. The tight labor market will likely continue for some time, and competition for tax professionals with technology expertise will remain fierce. The work-from-home shift has given businesses that provide that option a hiring advantage. Tax leaders should continue to keep an eye on the challenges and look for new, more innovative ways to attract and retain talent.

We delve into these chaos-cancelling strategies, and others, in more detail in the article