Data and analytics: what will be the tax functions’ role?

01 September 2016

The tax function is one of the largest consumers of data in organisations. Typically, according to a joint study we carried out with the Manufacturers Alliance for Productivity and Innovation (MAPI) tax spends more than half of its time gathering data. It’s something that tax functions excel at even though this is becoming more challenging as tax data is housed in many locations and the volume of data is increasing. But that same survey also found that tax functions spend less than a third of their time on analysing the data they’ve collected. And that’s a problem.

The volume of data available and our increasing ability to analyse and use it is having a major impact on companies and on every function within an organisation. We’re creating an environment where data is the basis for decision-making – and the major business functions are working hard to adapt to that world. Tax mustn’t be left behind.

That’s why the impact of data and analytics on the tax function is the subject of the third paper in our Tax Function of the Future thought leadership series. We look in detail at the data challenges facing tax functions and what they need to do to get themselves in shape for now and what’s to come.

The central message is that the tax function must shift its focus if it’s to harness the full potential of data analysis. That means concentrating on the analysis of the data it collects, and on creating strategic partnerships throughout the organisation.

This will take, among other things, excellent technology. But overall, spending on technology in the tax function remains stubbornly low – according to the Tax Executive Institute 2011-2012 Corporate Tax Department Survey, it amounts to less than 5% of the budget in most cases. Our MAPI survey found that 80% of tax functions recognise that better technology and integration would improve their tax effectiveness, and yet three-quarters don’t have a tax technology strategy, or any plans to develop one. Clearly, this has to change.

If they’re to truly add organisational value in a data-driven world, tax functions must also break out of the silos that many find themselves in. Tax has relevance to decisions made across the organisation and the tax function has a real opportunity here to show how it can bring value to the business – as long as the function is in line with the wider business strategy.

This means that tax functions have to be far more actively involved in data management and analytics – and in the budgeting and planning process for data projects – than they have been in the past. Historically, the function has taken a passive role in data strategy but the data challenges that the function faces, and the critical importance of data use and analytics to its future value, make active involvement absolutely critical. A coherent data strategy should include people from tax, finance, IT and other functions if a complete business case is to be made.

This blog was originally published by Mark Schofield here.

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