Understanding Tax Transformation: A Guide for Enterprise Tax Leaders

What Is Tax Transformation?

It’s a crucial yet frequently overlooked question. Your answer can have major implications on your organization’s return on tax technology and transformation investments, the tax department transformation journey, the tax group's relationships with the finance group (and many other parts of the company), and how efficiently the tax team operates.

Why Tax Transformation Matters for Enterprises

Business leaders have been discussing and pursuing digital transformation for years now. Tax leaders have recently been been driving tax transformation efforts to modernize their functions. The widespread pursuit of tax business transformation has generated valuable thinking and insights on improving these endeavors while avoiding common pitfalls.

Different Approaches to Tax Transformation

Different tax departments define and implement tax transformation services in unique ways, often leading to significant differences between their approaches. Tax groups may pursue transformation independently or with the finance group and other parts of the organization. Tax leaders may or may not be involved in the initial planning stages of finance transformations that pull tax into their orbit (although they should be involved early in these efforts).

By defining what tax transformation means to their function, the finance group, and the rest of the organization, tax leaders stand a better chance of gaining more valuable benefits from these initiatives. 

Key Questions to Define Your Tax Transformation Strategy

By define, I mean get a clear and broad understanding of what tax transformation should entail. Addressing the following questions can help cultivate this understanding:

• How will tax add value to the business in the next 5 to 10 years? Tax transformation initiatives should aim to help the tax group create value as the company progresses. Tax leaders must assess the company’s long term strategic plans to pinpoint opportunities for the transformation of the tax department to support broader business goals. If the company is considering reducing in its real estate costs over the next five years, for example, what insights can the tax group share regarding the tax implications of moving to smaller venues in other cities and states?
• How does the tax group help the CFO and the finance group? As CFOs take on larger roles in shaping corporate strategy and providing the financial data analyses used as the rationale for strategic pivots, it is more important than ever for tax leaders to work closely with finance chiefs. This ensures that tax considerations are Integrated Into the planning of cloud migrations and other transformation initiatives by finance groups.
• How are other groups in the finance/ERP ecosystem – and beyond - approaching transformation and technology upgrades? While the finance-tax partnership is essential, tax leaders also should cultivate and sustain collaborative relationships with many other parts of the business that have implications on the tax group’s activities, including:
  • IT
  • Legal
  • Compliance
  • Supply chain management
  • Procurement
  • Internal audit

By keeping current on tax transformation trends, technology upgrades and transformation initiatives throughout the business, tax leaders will have the information they need to define and execute tax transformation activities optimally.