Tax Reimagined – Leading the tax function in the digital age
Tax is taking on a prominence it never had before thanks in large measure to how technology is impacting everything from business models, operations and revenue streams, to the regulatory environment and how tax authorities collect tax and assess risk. Today’s tax professional has to also be a technology professional as digitisation is evolving the operational structure of tax functions and tax leads are trying to figure out the role of technology, the personnel and skills they’ll need and the operating models that will help them deliver optimum value.
All of this seems particularly evident in multinational insurance firms, which have the added challenge of having to manage change in a consistent way across different jurisdictions. According to KPMG’s 2018 Chief Tax Officer Outlook, tax departments are struggling to keep up with the pace of technological advancement, with only 45 percent of tax leaders managing to stay on top of the latest digital innovations. Data analytics is a top priority, with 79 percent of tax leaders anticipating investment in this area in the next year. It’s clear that tax in the digital age must be reimagined.
Global trends driving change
Five key trends are behind the evolving role of tax and tax functions:
Geopolitics and the move towards protectionism are creating uncertainty in the international tax arena and having a greater impact on businesses and business models. Governments are also pushing for more tax transparency and responsibility.
Technology is advancing at a rapid pace forcing tax professionals to become knowledgeable about innovations such as cloud, intelligent automation and blockchain and how they might best be implemented in the tax function to meet the new requirements of digitised businesses.
Economic budget constraints are driving organisations to seek new avenues for cost savings.
Social as digital solutions continue to work their way into businesses, they are also evolving the workforce and what that might look like in the not-so-distant future.
Regulators too, are using new technologies such as data analytics and want and expect direct access to data.
Where to start
With all of this change, tax leaders at insurers around the world are being challenged to determine a new way forward. Each insurer is different and there is no one-size-fits-all solution to a reimagined tax function. That said, charting a new course begins by moving away from the long-held view of the tax function as a cost centre and towards embracing its role as a value driver and strategic enabler. This is a significant mind shift but required in order to help the overall business achieve its objectives.
Unlocking the value of the finance function
Among the key drivers of value in the tax department at an insurance company is indirect tax, which includes Value Added Tax, premium tax and sales tax, for example. Unlocking the value of indirect tax requires ensuring the firm doesn’t overpay them, which can impact pricing, the combined ratio and the bottom line. Because indirect tax is primarily transactional-based tax, it is an area where Intelligent Automation or data analytics can be effective in driving insights to better inform decision making.
When it comes to direct tax, new modeling technologies have a role to play in helping insurers take a holistic versus the localised view of their organisations’ operations and tax positions. The data analytics that comes from these complex models can help the tax function make more informed decisions based on the complete picture, faster.
Transforming the tax function
Technology is critical in helping tax leaders improve performance, manage risk and deliver value. Here are three key pieces of advice to reimagine tax and the tax function:
- Take a close look at the current Target Operating Model (TOM)- Key to enabling corporate strategy. What worked five, four or even three years ago likely won’t be the model that will take the firm into the future. Be sure to take a holistic outside-in approach that takes into account the insurance firm’s own unique characteristics and addresses three critical areas of the business–sourcing, operations and performance–to determine how to bring value.
- Make unlocking value the centre of the tax function’s transformation-Drive an organisational model that supports innovative thinking which will enable the vision of what the future could look like.
- Walk before you run- Evolving into a highly strategic and value-add tax function is an iterative process that can only happen with thoughtful planning. Start by looking at the technologies that will best address the needs of your organisation in terms of time and cost savings, efficiency gains, and helping to move the tax function to a true enabler of value.
For more insights and developments in insurance and InsurTech, please visit KPMG.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. © 2019 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.