As optimistic CEOs eye a return to growth, what does this mean for tax compliance?

by Jonathan Howe UK Tax Reporting and Strategy leader, PwC United Kingdom

Email +44 (0)7841 784956

CEOs are optimistic about a faster than predicted return to growth as countries and economies start to recover from the COVID-19 pandemic. More than three-quarters of UK CEOs (77%) think global economic growth will improve over the next year, according to PwC’s 24th annual CEO Survey. To seize this opportunity, most CEOs (84%) plan to pursue organic growth in 2021, for example through greater operational efficiency, as well as entering new markets and launching new products or services.

This expansion trend will:

  • Accelerate the already increasing tax compliance burden on companies.
  • Put pressure on tax specialists to step up and partner with the business to support these growth aims and answer questions such as “What will entering new markets and territories mean for the company’s bottom line?”.
  • Shine a spotlight on the efficiency of tax departments as part of the wider focus on operational efficiencies (cited by 70% of UK CEOs) that will underpin organic growth. 

To respond to these challenges, tax functions will need to be smarter and more efficient in the way they manage both the increased compliance burden and play a more strategic role in the business. 

Dealing with an increasing tax compliance burden

Growth often brings additional compliance requirements, and entering new territories or launching new products may mean a whole set of new and unfamiliar compliance obligations to manage. This is against a backdrop of  tax regimes becoming more demanding with new rules, shorter deadlines and a growing focus on requiring assurance over data used in tax returns.

Because of this greater scrutiny by tax authorities, companies must be able to stay on the front foot and respond quickly to meet these new obligations. Failure to comply could ultimately result in damage to the relationship with tax authorities, as well as a greater risk of fines or wider reputational damage.

Companies need the agility to respond and scale up their tax compliance approach and controls quickly and efficiently.

Delivering tax compliance and being an effective business partner

To support the desire for growth, tax functions need access to high quality data that can be used for business modelling. They must be able to advise the business on what growth may mean for cashflow, reporting and the value of tax assets.

To achieve this, tax departments need a compliance data set that provides a far broader range of insights than just those used for managing day-to-day compliance. And they need to create capacity to perform this expanded role.

Efficient compliance needs to be underpinned by data and technology

Initiatives such as Making Tax Digital in the UK require companies to provide data in a certain format and, increasingly, in real time. Tax authorities are also starting to examine the underlying technology that tax departments use, assessing if it has the appropriate capabilities for delivering tax compliance.

This means tax functions need to know where their data originates from and be able to ensure its quality from source right through to the submitted tax return. Achieving this data quality and process efficiency will involve smarter use of technology to clean and test data.

However, the need for greater operational efficiency will also force tax departments to do more with less, or without any significant new investment. So how do they scale up resources and implement new technologies to achieve this, while still keeping compliance costs down? 

Are you ready to respond to these challenges?

Here are some key questions to help you gauge how prepared your tax department may be to support growth:

  • Are you able to manage your cost targets while the compliance burden increases?
  • How resilient is your tax function to changes in strategic direction or external changes?
  • Can you scale up your operations to respond to a greater number of tax requirements?
  • Could you provide a robust response to any compliance questions from tax authorities?
  • Can you quickly gain access to high-quality data?
  • Can you get the insights that you need for the business from your tax data?

Get in touch to learn about how we can help your business to quickly scale up resources and meet rising tax compliance demands; creating meaningful value and efficiencies.

by Jonathan Howe UK Tax Reporting and Strategy leader, PwC United Kingdom

Email +44 (0)7841 784956