In the face of evolving regulatory landscapes and technological advancements, corporate tax departments are prioritizing compliance and resource management to navigate modern challenges
In the ongoing and rapidly changing business environment, corporate tax departments are facing a multitude of challenges. As they strive to keep pace with regulatory changes and technological advancements, department leaders are tasked with balancing compliance, resource management, and innovation.
Not surprisingly, nearly 60% of tax department leaders have identified compliance and regulatory adherence as one of their top priorities, according to the findings of the Thomson Reuters Institute’s recent 2024 State of the Corporate Tax Department report.
The balancing act of resource management
One of the primary challenges for tax department leaders is managing resources effectively. The report underscored this among those department leaders surveyed, showing that more than half of them said they felt their tax departments were under-resourced — an astounding finding.
There are many negative ramifications of your department being under-resourced, from staff experiencing burnout at a higher rate to more critical consequences like increased audits and penalties. Managing this involves making strategic decisions about how work is performed — whether through in-sourcing, outsourcing, or co-sourcing. Historically and even now, most tax department leaders would prefer to keep much of their work in-house, but the growing complexity of work and the increasing volume of work is making it difficult for departments to have in-sourcing as the only choice.
While some departments may consider outsourcing to external firms, the consensus among department leaders is to maintain control internally making co-sourcing the better choice. This approach ensures that the department owns the entire process, reducing the risk of miscommunication and errors with outside providers.
For the work that remains in-house, however, department leaders then have to confront the challenge of balancing talent and technology, making sure their teams have the necessary skills and tools to manage workloads efficiently. This often involves investing in technology that supports and enhances human capabilities. However, less than a quarter of tax departments’ budgets are being spent on technology, according to the report, although most department leaders surveyed said they hope or anticipated that this will change over the next 12 months.
Is technology a double-edged sword?
There is no doubt that technology plays a crucial role in modern tax departments, offering both opportunities and challenges. Most tax departments (79%) have automated half or less of their work, the report showed, with technology being used to automate routine tasks, and therefore freeing up employees to focus on higher-level strategic activities. This practice not only improves efficiency but also helps the department retain talent by eliminating the least-desirable aspects of the job.
When advocating for technological investments, department leaders should not only emphasize the need for such investment to mitigate compliance risk but also highlight how it will help with retaining staff.
However, integrating new technology is not without its challenges, requiring careful planning and training to ensure that all team members are equipped to use new tools effectively. One challenge identified in the report that’s currently faced by department leaders is staff adoption. Indeed, even when companies recognized the need for technology investment in their tax departments, those departments often face the challenge of getting the technology utilized — in the way it should be and to the degree that makes the investment worth it.
Therefore, having a standardized approach to training may not always be effective, rather it may be far more beneficial to train staff on the technology in the way in which they would be working with it, based on their unique needs and workflows.
How to build & train a resilient tax team
Too often there is just one course of training that typically comes only at the beginning of a technology’s implementation; however, for success, departments must provide continuous training and development in order for staff to maintain the needed skills and cultivate an adaptable workforce environment. That’s why it’s important for department leaders to prioritize training as part of annual departmental goals and development plans, ensuring that their teams are equipped to handle current and future challenges.
In additional, interdepartmental training could be particularly effective, allowing team members to learn from each other’s experiences and expertise. Having a culture that encourages curiosity and continuous learning while also fostering collaboration builds a team that is resilient. This further allows for team members to feel valid and not stagnant in their jobs as they experience or expand their roles.
In the report, many tax department leaders cited hiring and retaining talent as a top priority, and part of the talent picture includes the various policies companies may have around return-to-office plans. For those tax department leaders who are part of an organization that has mandated a return to office, they have to find other ways to keep staff engaged and provide additional incentives to retain them. Tax departments that remain hybrid might fair better with retaining talent, however some team members may struggle to have the kind of engagement that comes organically with in-person office work.
Leading a corporate tax department through continuous change requires a strategic approach that balances compliance, resource management, and innovation. By focusing on in-sourcing and technology, fostering a culture of continuous learning, and implementing flexible return-to-office policies, leaders can position their departments for success, as our recent report suggests. With the right strategies in place, tax departments can not only help their companies meet regulatory requirements but also drive additional value for their organizations.
You can download a full copy of the Thomson Reuters Institute’s 2024 State of the Corporate Tax Department report, here.
