The impact of IFRS 17 on the tax function

05 December 2018

IFRS 17 brings huge change for the insurance industry. This new accounting standard will require companies to transform their accounting systems, processes, data and governance.

Over the past few months there has been much focus on how IFRS 17 will require finance and actuarial platforms to be transformed. When one thinks traditionally about tax, many only consider the impacts on the numbers and tax calculations in the financial statements and tax returns. However, if a company is making changes to its finance systems, the data it gathers, its controls framework, etc., it is likely there will also be a big impact on the tax function.

Therefore one must ask, “Can IFRS 17 be a catalyst to build your Tax Function of the Future?” The answer is yes!

With change comes opportunity and it is important to identify the silver lining. IFRS 17 should not be viewed as just another compliance requirement. It is essential that tax have a seat at the transformation table. IFRS 17 can and should be used as catalyst to start building your Tax Function of the Future now. The good news is that the deferral of the standard means tax functions have time to get up to speed with what is going on with their IFRS 17 programmes and get involved.

We have identified the following a few key areas where IFRS 17 may have an impact on the tax function and how you can leverage these into opportunities:

Data: As the data requirements for insurance accounts change a tax function must ensure it still has access to the data it needs - for now, in the future, and access to the historic data required by law and audit requirements. There is also the opportunity to automate some or all of your data gathering and cleansing tasks. This will provide efficiency savings, improved quality and also help ensure you can comply with new digital and real time reporting authority requirements.

Systems: IFRS 17 implementation may mean substantial changes to your finance systems or new systems being implemented. Not only must you ensure that these systems provide the functionality you need to mirror existing processes, it is likely that they will have functionality to enhance what you currently do. Many systems have tax tools and capabilities embedded but investment is required to get the most out of them. There is also the opportunity to change how existing stand-alone tax tools link with these systems - again reducing risk and increasing efficiencies.

People: The standard is likely to put pressure on the workforce in terms of time and getting up to scratch with the tax implications of the standard. There is an opportunity to upskill your workforce with the ability to use and understand tools with analytical capabilities.

Governance, processes, controls & risk management: You will also need to update your tax control framework and governance strategy as a response to the wider finance function changes. You could take the opportunity to take this further, strengthening and embedding the tax control framework, reducing risk and helping manage tax authority relationships.

In addressing the challenges and opportunities of IFRS 17 for your tax function we have identified 7 key steps:

    • Determine current finance transformation activities within the organisation and ensure that tax function has a seat at the table.
    • Have a clear vision for your Tax Function of the Future ensuring that your IFRS 17 investment is getting you closer to realising that vision.
    • Evaluate the current business state – what are the C-suite priorities, and how should they be reflected in the transformation roadmap? This includes an obtaining an understanding of funding availability and limitations.
    • Prioritise upcoming challenges and risks that could have a significant impact on the tax function’s resources and capacity.
    • Make sure that the scope of your IFRS 17 data and system changes capture the full capabilities that your tax function will need in the future.
    • Document current tax function requirements – identify key information flows, process times, as well as known ‘trouble’ areas that tend to be problematic every year.
    • Make sure the data, system and process changes required for IFRS 17 create leverage for the tax functions to deliver more value and insight for your business partners and stakeholders.

For more information about emerging trends affecting the tax function, please see our library of articles and videos at www.pwc.com/taxfunctionofthefuture

 

Lindsay J'afari-Pak

Lindsay J'afari-Pak | UK and Global IFRS 17 Insurance Tax Leader
Profile | Email |  +44 (0)7738 844853

Jonathan  Howe

Jonathan Howe | UK Tax Reporting and Strategy leader, PwC United Kingdom
Profile | Email | +44 (0)20 7212 5507

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