Modern CFOs are driving greater integration of data analytics, technology, and strategic planning into tax functions, necessitating enhanced collaboration, compliance, and talent development within tax teams
The role of the corporate chief financial officer (CFO) has undergone significant evolution in recent years, driven by the need for those in this role to navigate a complex and rapidly changing business environment.
The CFO role is expanding beyond traditional finance functions to encompass broader strategic responsibilities, such as balancing near-term and long-term investment priorities, embracing risk and innovation, developing leadership and talent, and leveraging technology and data. This evolution is profoundly impacting various facets of many organizations, including their internal tax department.
One of the key aspects of the evolving CFO role is its increased involvement in shaping the overall direction of the company. Modern CFOs are not only financial stewards but also strategic partners who drive consensus within the leadership team and provide insights into the external and internal factors that most impact the business.
This shift necessitates closer collaboration between the CFO and the tax department, as tax policies and (ever-changing) tax regulations can have a significant impact on business decisions, such as mergers and acquisitions, international expansion, and changes in capital structure. Indeed, in-house tax professionals are now expected to contribute to their companies’ overall strategic planning, providing guidance on how to optimize the company’s tax position and mitigate tax risks, while aligning with the organization’s broader financial and business objectives.
The push for data-driven decision making
Another key aspect of the evolving CFO role is the increasing reliance on data analytics in financial decision-making. CFOs are leveraging advanced data analytics tools to gain deeper insights into financial performance, risk management, and value creation. This requires the tax department to be proficient in data management and analytics, transforming raw data into actionable intelligence that supports the broader financial strategy.
Today’s tax professionals must be able to collect, analyze, and interpret tax data, such as tax liabilities, compliance risks, and opportunities for tax optimization. They must also be able to communicate the tax implications of various scenarios and alternatives to the CFO and other stakeholders, using data visualization and storytelling techniques.
Modern CFOs are not only financial stewards but also strategic partners who drive consensus within the leadership team and provide insights into the external and internal factors that most impact the business.
With regulatory environments becoming more complex and scrutiny from tax authorities intensifying, the CFO’s role in ensuring robust compliance and risk management also has become critical. CFOs are responsible for overseeing the tax compliance function, ensuring that the organization meets its tax obligations in a timely and accurate manner, while minimizing tax exposures and penalties. They are also responsible for managing the tax risk function, identifying and assessing the potential tax risks and opportunities that arise from business activities, transactions, and changes in tax laws.
To support the CFO in these tasks, the tax department must adopt more sophisticated compliance frameworks and risk assessment tools, using advanced technologies such as artificial intelligence (AI) and machine learning to enhance compliance processes, detect anomalies, and mitigate risks proactively.
Technology & talent integration
Further, many CFOs also are driving their organizations’ digital transformation agenda — a critical step toward modernization and improving efficiency within the tax department. To this end, CFOs are compelling their tax departments to integrate new technologies that can streamline tax processes, improve accuracy, and reduce manual workload. These technologies often include cloud computing, robotic process automation, and blockchain, which can enable tax professionals to access and share tax data more efficiently, automate repetitive and low-value tasks, and enhance the security and transparency of tax transactions.
Today’s CFOs are championing the adoption of these tools to better enhance efficiency and ensure that the tax function can keep pace with the evolving business landscape. They are also driving the implementation of tax technology strategies, ensuring that the tax department has the necessary infrastructure, systems, and skills to leverage these technologies effectively.
In fact, the talent and skills aspect of the internal tax function itself is growing in importance. There is a greater emphasis now on developing a tax department that possesses a diverse skill set. As a result, CFOs are at the forefront of investing in upskilling tax professionals, encouraging continuous learning, and fostering a culture of innovation. This often may include training for tax professionals in new technologies, regulatory changes, and strategic thinking.
Today’s CFOs are championing the adoption of these tools to better enhance efficiency and ensure that the tax function can keep pace with the evolving business landscape.
The ultimate aim, of course, is to build a tax team that can adapt to changing demands and contribute more effectively to the organization’s goals. In fact, CFOs are also prioritizing the development of their finance teams, focusing on leadership development, talent management, and cultural change as part of this strategy. And overall, they recognize the importance of emotional intelligence and interpersonal skills in driving transformation and achieving strategic goals. They are also mentoring and developing the next generation of finance leaders to ensure a pipeline of talent for future leadership roles within the company.
The global nature of modern businesses means that CFOs must navigate complex international tax landscapes as well, which can have significant implications for the tax department. In many situations, the tax department must manage cross-border tax compliance, transfer pricing, and global tax planning, in order to ensure the organization optimizes its global tax footprint while complying with diverse regulatory requirements.
Again, to this end, CFOs are working closely with tax experts to develop strategies that take into account the tax implications of various business decisions, such as where to locate operations, how to structure transactions, and how to repatriate profits. They are also monitoring the developments in global tax reforms, such as the Organisation for Economic Co-operation and Development’s Base Erosion and Profit Shifting (BEPS) project, which looks to address the challenges of taxation in the digital economy.
Conclusion
The evolving role of today’s CFO is reshaping the corporate tax department, driving it towards greater strategic involvement, technological adoption, and enhanced compliance. This transformation will require many tax professionals to develop new skills, embrace innovative tools, and work more collaboratively with other areas of the organization.
As CFOs across the globe continue to take on more prominent roles in steering their companies’ strategic direction, the internal tax department must evolve in tandem to support and drive the organization’s business success.
To learn more about technology’s impact on corporate tax departments, listen to a recent Thomson Reuters Institute Insights podcast, now on Spotify
