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  • Writer's picturePGAA Tax

Repost: KPMG's Chief Tax Officer 2024 Outlook Study

This is a publication we look forward to every year and this year is no exception. We are reposting the section that PGAA Tax is involved most with: Tax operations and talent 

Many factors have been driving the ongoing evolution of tax operations: downward budget pressure, added regulatory complexity, increased data requirements, new expectations  from the C-suite leaders, and changing demands of tax talent. Today, technological disruption stands out among the rest. As a tech-centric future of tax unfolds, it raises a critical question about tax models and people: What operating structure and  skill sets will fully unlock newfound capabilities, enabling tax functions to turbocharge efficiency and create value beyond  compliance?

Leveraged strategically, technology can fundamentally transform how tax teams work and the value they contribute.  Software and algorithms can take over many aspects of data capture, computation, reconciliation, and other routine,  transactional and time-consuming compliance, reporting and  risk management workflows. But deploying technology is not  necessarily fast nor cheap, and it often requires knowledge and skill not available in-house. To incorporate and capitalize on the latest technologies, a far broader tax function reinvention will be needed, from realigning service delivery models, to addressing talent gaps, to embracing new ways of working. 

KPMG research indicates that such challenges are driving a shift toward increased use of outsourcing and co-sourcing within tax. According to the 2023 KPMG Global Tax Function  Benchmarking Survey,3 25 percent of companies plan to increase their use of co-sourcing/outsourcing or tax managed  services. And this survey provides the reason: Greater access to advanced technology (41 percent) is the top benefit respondents expect to obtain from greater outsourcing or co-sourcing. Tax teams are leaning into their service providers  because they are already investing in the hot technologies of the day and have the most knowledgeable, skilled people to design, deploy, and use them. According to eBay’s Jurek, a combination of budget, pipeline, and workload issues make it crucial for tax departments to embrace innovation.

“We can’t have unlimited budgets, so when you put the complexities of what we do in tax together with the sheer volume of increased regulation, we physically cannot do  our jobs without greater efficiency,” she said. “With fewer people entering the tax and accounting fields, we have to  work out how to automate things, and at the same time,  level-up the people we have.” 

Outsourcing and co-sourcing can also help tax departments address a related problem of the digital era: talent risk. As the nature of work in tax evolve, there is growing demand  for higher-value roles. The 2023 KPMG Global Tax Function Benchmarking Survey finds that employee turnover is a key disruptor in 31 percent of tax departments. Using service  providers to handle technology-driven tasks can help free up in-house professionals for tax planning responsibilities, which require more advanced skills: general business knowledge,  data fluency, collaboration, and critical analysis. 

Nearly 4 in 10 (39 percent) of tax leaders surveyed say attracting and retaining in-house talent is a top benefit of outsourcing or co-sourcing adoption. In addition, 49 percent of respondents say they will use independent contractors in the next three years, up from 44 percent during the past two years.  

Peloton leverages a co-sourcing model, with KPMG as a service provider, to reduce operating costs while achieving  several other benefits. The service provider gathers, reviews  and analyzes data for initial calculation and compliance activities—especially for niche areas—while the in-house team of tax experts owns and manages data, facts, and  business relationships. 

“I think the greatest benefit of working in a co-sourced arrangement is access to expert tax professionals when we  need them,” said Stanton. “When you have a co-source

model, you can flex with the business. When things get really busy—or when needs pop up in specialty tax areas, or in jurisdictions that are just a small part of our structure— we can leverage our service provider team for additional tax talent to help with the compliance workstreams. When things get slower, we can dial down.” 

Moderna—which has been on a three-year journey to grow, formalize and centralize its tax function along with the  company’s rapid growth—has begun to pull certain activities that were previously outsourced back in-house, such as U.S. federal and state tax return accounting and compliance. "It gives us more immediate visibility and better control of  timing and processes,” said Larkin. International return work remains outsourced or co-sourced.  

“Having external teams fully manage our international returns made more financial sense than staffing one or two people  in every country, and it also helped align with our statutory  accounting, which is also outsourced,” Larkin said. “For  country-by-country reporting, we have a small dedicated  in-house team supported by external teams, who have experience in the specific rules for each country.” 

Using contractors also helps Moderna release the in-house team from routine, mundane activities and free up time for self-investment through training and development. “You always want to use your people for the highest best use,” said Larkin. Work arrangement changes are also on the horizon as tax leaders look to cultivate the skill sets of the future, close talent gaps in the internal tax function, attract and retain top-tier talent, and address counter-cultural resistance to the human impact of technology transformation.  

Over the next three years, 41 percent of tax functions will redesign roles in response to the evolving tax landscape.  The same percentage plan to implement flexible work  arrangements or remote work policies for tax department  employees. Finally, nearly half of tax functions (47 percent)  say investing in professional development and training for the tax team is a key way to enhance their departments’ contribution to enterprise-wide decision-making.  

Both eBay and Moderna have a hybrid tax workforce and their leaders recognize the value of both choice and balance for employees and dedicated time for in-person connectivity  and collaboration. 

“When I think how much the world has changed, I don’t really see it ever being back to what it was pre-COVID-19,” said  Larkin. “There is a strong desire and a push to be in the office  from a culture standpoint and to be interacting with your teams and others on a daily basis, but there is flexibility in that.”  

Relatedly, the impact of technology enablement within tax is starting to make a tangible difference tax professionals’ roles: being liberated from the grind of routine, transactional  processes.

In this survey, 41 percent of respondents say their organizations use technology to free up human capital so their tax professionals can focus on more strategic, value-added activities. Although there is still room for improvement, this marks a jump of 9 percent from our prior year survey.

Jurek’s view is that asking people to use technology to dothings differently than they’ve done before is a particular challenge for the stereotypical tax professional.

“As a breed, we might be perceived as risk adverse,” she said. “We like to reconcile to the dollar. We think, ‘If it worked this well for the last five years, why mess with it?’ Getting people willing to be open and adapt is a cultural shift happening in tax departments right now. What we need to show is that yes, tasks will be automated with technology, but ultimately that can make people’s roles more interesting and of higher value.” Peloton’s Stanton said the most critical skills to be a successful in-house tax professional in the increasingly digital world of tax are not technical ones, but soft skills: curiosity, partnership, and communication.

“Without curiosity, you might not explore multiple layers of information that can perhaps unlock tremendous value,” Stanton explained. “Without partnership, you won’t receive information that is going to be most helpful to achieving what you set out to do. And communication is equally critical because you have to be able to share with others the great things that you know. If you’re a tax expert who can’t communicate in a digestible way the knowledge that you’ve accumulated over time, it’s hard to drive value.”


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