Getting Tax Data Right

Only 13% of Tax Departments are highly satisfied with their technology systems. Focusing on data governance will improve your return on investment.

The conventional solution to many tax department process inefficiencies is to bring in a new software system. In fact, according to the Tax Director Roundtable’s annual agenda poll results, investment in tax technology systems was featured among the top three objectives for the tax department in the past two years. Unfortunately, when we asked Heads of Tax at large, multinationals to describe their level of satisfaction with their technology systems, we were surprised to find that only 13% indicated that they were highly satisfied.

While the right technology plays an important role in driving performance, realizing high return on technology investments is difficult. Software vendors often promise fantastic results. However, our research shows that investments in data governance should be made prior to automation.

A Vendor Agnostic Viewpoint:
The vendor a tax department selects has minimal impact on the level of satisfaction with the performance of the system. We tested 20 tax technology-related attributes and isolated the most important drivers of high performance. For our study, high performance is defined as delivery of error free performance, capacity to effectively pursue planning activities, and minimization of the impact of change. We found six technology-related attributes that have a significant impact on high performance. They were:

• Staff extracting maximum value from the current technology systems
• Technology Investments consider future department needs
• Technology Investments are aligned with business needs
• Technology Investments are flexible and adaptable
• Tax Departments is effective in collaborating with the IT organization
• Tax Department staff members are learning new IT skills.

We were surprised to observe that none of these six attributes were related to the type (or maturity) of system used.

Investments in technology come in two forms – the technology system itself and the governance structure that underlies the system. Our research shows an abundance of interest in automation investments across our network of tax departments. These investments have the potential to improve department efficiency. To be able to extract maximum value from their systems, tax departments need to invest in a key aspect that is often overlooked: technology governance.

What the Best Tax Departments Do
While most tax departments tend to focus on the attributes of technology systems, the best tax departments recognize that failure to invest in technology governance can render new tax technology investments ineffective. Specifically, they:

• Write a technology roadmap: Tax departments cannot make technology decisions in silo; ultimately, the system they implement has to fulfill business needs effectively. The best companies identify internal stakeholders with a link to tax technology systems – either as providers or as consumers of data –and identify their data needs to ensure that their technology investments align with business needs.
• Get the data quality right: Most tax departments underestimate the value of improving data quality. Without good data, tax departments face a “garbage-in, garbage-out” situation with their systems. Therefore, the best tax departments understand how data flows across different systems and processes, uncover breakpoints at a granular level, and make targeted technology investments. Conducting a data flow workshop and building a data flow map can be initial steps in getting this right.
• Maximize the value of existing technologies: The best tax departments engage end-users early in the implementation process; provide adequate training on new systems, and focus on managing the change that comes after a new system goes live.

With so much changing in tax departments, it is easy to get excited by software vendor presentations. But our research teaches companies, “Don’t get caught up in the technology hype.” Work with your existing resources to achieve more leverage. These simple tactics and a renewed focus on data governance will make your department more flexible and more efficient.

What We Are Doing for Our Membership
Improve your data governance by visiting Tax Director Roundtable (TDR) resources and services:

• Make improvements to your tax technology roadmap by visiting our Process Improvement and Tax Technology web topic center.
• Listen to a replay of our teleconference, Tax Technology: Integration with Efficiency Projects.
• Use TDR’s Anatomy of a World-Class Tax Department to compare your capabilities to other large corporations.
• View cases from companies such as Aon, Cargill, and Praxair.

To find out more about how the Tax Director Roundtable can help you make better technology decisions, please ask about membership, or if you are already a member, contact your account manager.

- Additional research by Pritika Bhattacharjee