2017 Tax Management Consulting Conference Welcome and tax management trends. Deloitte, Kuala Lumpur 12 July 2017

Transcription

1 2017 Tax Management Consulting Conference Welcome and tax management trends Deloitte, Kuala Lumpur 12 July 2017

2 Agenda Overview 5 Tax operating models 8 Main commercial drivers 12 Resourcing 17 Country by country reporting 20 Governance 22 Technology 25 Summary 29 2

3 Overview 3

4 Market overview Deloitte has carried out an independent biennial survey into the management of tax 2010 to 2016 Each conducted with 250 global decision makers from the largest global MNCs Resulting in data from 1,000 interviews with key global decision makers North America 30% USA: 30% 26% Canada: 4% Europe 43% UK: 14% Germany: 13% Netherlands: 6% Belgium: 4% Italy: 4% France: 2% The population of MNCs: Operating in 5+ countries Global revenue of more than US$200m Representative spread of MNC HQ and subsidiary locations Spread of industry sectors LatAm 6% AsiaPac 20% Brazil: 4% Japan: 12% Mexico: 1% Taiwan: 3% Colombia: 1% Australia: 2% Argentina: <1% India: 2% Singapore: 1% 4

5 Market overview Global revenue % Industry sector % Number of countries operating in % m 43 Manufacturing countries 53 Financial Services bn 33 Business Services countries 19 Wholesale & Retail countries 16 Transport, Comms, Utilities 7 5+ bn 22 Mining countries 9 Research continued to cover MNCs tax operating models comprising: Processes Resourcing Governance Technology Some new elements in 2016 survey: TP documentation and CbyC reporting Emerging technologies 5

6 Market overview the story so far The research findings from 2010 to 2014 gave a pretty clear story of pressure causing a reasonably consistent MNC response Environmental pressure from all sides Causing MNCs to follow a clear path Increased regulation Search for quality and control with a desire to be able to add value but too busy to do so Globalisation of business Changes in tax operating models: centralization; integration; and consolidation Increasing impact of technology Increased governance and risk management Internal pressure to do more with less Early steps with technology but nervous of big change 6

7 Tax operating models 7

8 Tax operating models 8

9 Tax operating models Less centralization has occurred than was anticipated in 2014 Models broadly static though fewer clients are operating method 3 in 2016 than 2014 Overall Client delivery models are forecast to remain static over the next three years 2014 model 2016 current model Method 3 18% Method 1 23% Method 3 16% Method 1 25% Method 2 59% Method 2 59% 11% plan to make changes within their existing Client Method 33% of Method 1 plan to move to a more centralised operating model in 3 years 9

10 Tax operating models by process Considerable variation Indirect tax returns are the most decentralised area More global tax provisioning (particularly US GAAP reporting) being outsouced New areas (TP documentation and CbC reporting) are managed/ expected to be managed in a relatively centralised way Transfer Pricing Documentation 3% 13% 32% 52% Global Tax Provision 3% 13% 41% 44% Other model Country by Country Reporting 12% 23% 24% 40% Client Method 1: some global decision making Client Method 2 : Centrally co-ordinated Corporate Income Tax Returns And Payments 46% 34% 20% Client Method 3: Centralised Statutory Accounts 1% 47% 32% 20% Indirect Tax Returns And Payments 64% 16% 19% 10

11 Main commercial drivers 11

12 Commercial drivers Consistent with previous years quality and control continue to be key % Low Qualitative interviews suggested ongoing response to regulation has placed greater emphasis on other drivers Cost and process efficiency are less important to those operating centralised models whilst this is a key driver for those operating client method 1-3% 85 No change 77 +2% 59-4% 55-4% 50 % Medium % High Quality Control Ability to add value Cost Process efficiency Cost Control Quality Process efficiency Ability to add value internally to the business Return on investment, overall value for money Transparency, visibility, risk management, consistency Expertise, accuracy, timeliness, reliability Simple, trouble free, easy to manage Contribute to strategic success/corporate objectives, contribute to transformational change and provide tax input to operational decisions Organisations anticipate that control and process efficiency are both likely to become increasingly important 12

13 Importance of current drivers Current drivers of organisation & management of tax Trend since 2012 (% High importance) Little change in the importance of drivers since 2012, although process efficiency has declined 100% 80% 88% 85% 77% 60% 40% % 62% 59% 57% 59% 55% 59% 50% 54% 20% % Quality Control Ability to add value Cost Process efficiency 13

14 Satisfaction levels Levels of satisfaction with the current delivery model remain low. Satisfaction with process efficiency is particularly low at 16%. Companies adopting method 2 are consistently the most satisfied. Companies adopting method 1 tend to be least happy. 60% 40% 58% 55% 42% 43% 58% 50% 36% 37% 45% % 34% 33% 34% 26% % % 0% Maximising quality Guaranteeing control Ability to add value Managing costs Process efficiency 14

15 Future importance of drivers Anticipated importance of drivers over next three years (% more important) 80% 63% 60% 40% 40% 40% 57% 53% 52% 45% 41% 40% 54% 56% 38% 38% 20% 28% Client Method 1 Client Method 2 Client Method 3 0% Quality Control Ability to add value Cost Process efficiency Rank order of current importance 15

16 Resourcing 16

17 Resourcing Current resourcing model % Other % Outsource % In own SSC % Within finance % Within global tax Global tax provision Transfer pricing documentation Country by country reporting Indirect tax returns and payments Corporate income tax returns and payments Statutory accounts 17

18 Resourcing Ideal versus current resourcing model Global tax provision Ideal 62% 14% 8% 13% % Within global tax Current 59% 19% 7% 10% 5% % Within finance In an ideal world MNCs would do: less in finance (Provision, indirect and TP documentation); more in global tax (Provision and CBC Reporting); would push more indirect into Shared Service Centres; and outsource more of TP documentation and indirect tax. Transfer pricing documentation Country by country reporting Indirect tax returns and payments Ideal Current Ideal Current Ideal Current 46% 48% 49% 44% 23% 32% 29% 8% 9% 35% 13% 14% 17% 6% 8% 5% 30% 23% 21% 6% 13% 22% 24% 34% 12% 20% % In own SSC % Outsource % Other Corporate income tax returns and payments Ideal Current 33% 30% 17% 20% 12% 7% 36% 40% Statutory accounts Ideal Current 21% 20% 43% 45% 15% 12% 18% 19% 4% 4% 18

19 Country by country reporting 19

20 Country by country (CbC) reporting CbC reporting approach 66% of companies are required to do Country by Country reporting Don t know Haven t decided Both bottom up and top down Bottom up 4% 8% 10% 35% Top down 44% Clients have mostly decided on their approach - split fairly evenly between Top Down and Bottom Up. Top down approach - most likely for clients operating a method 3 model and/or operating in 30+ markets. Predominant reason for the approach taken is access to and quality of data. 75% of clients will reconcile their CbC reporting with at least some local country filings. 25% say they won t reconcile at all. 20

21 Governance 21

22 Governance - tax policy or strategy Formal written tax policy in place setting out governance standards? Among the total sample: 44% of companies have a formal written tax policy/ strategy 17% - Policy has been signed off by board, turned into an operational plan and there is confidence in its adherence 22% - Policy has been turned into a plan and have confidence in its adherence MNCs operating a method 3 are more likely to have a formal written tax policy in place - although no more likely to have this signed off by the board or turned into a plan. Governance processes are most likely to be in place in companies operating in more markets and in Europe (the UK in particular 78% have a formal tax policy). 22

23 Governance risk management 57% of companies have formally assessed the appetite for tax risk in their organisation 59% of companies have a formal process for managing and monitoring tax risk 74% of companies regularly report to the board on tax risk 36% have formally assessed appetite for risk, have a formal process for managing and regularly report to the board. 12% have not formally assessed appetite for risk, do not have a formal process for and do not regularly report to the board. 23

24 Technology 24

25 Technology Formal plan in place Budget assigned Individual with overall responsibility Don t know 2% Yes 24% Don t know 3% Yes 43% No-one 36% Respondent 44% 12% have a formal plan, someone with responsibility and an appropriate budget. No 74% No 54% Someone else in the company 20% 24% do not have a formal plan, anyone responsible or an appropriate budget. 25

26 Technology potential benefits Potential versus current benefits of tax technology Improving process efficiency Potential benefit 66% 27% 5% Potential benefit High potential Current benefit 20% 52% 22% 4% Medium potential Low potential No potential Improving quality and accuracy of data Potential benefit Current benefit 22% 64% 51% 28% 22% 6% 4% Don't know Current benefit High benefit Medium benefit Improving risk management Potential benefit 40% 42% 16% Low benefit No benefit Current benefit 14% 48% 32% 5% Don't know Better planning & business decision making Potential benefit 32% 46% 20% Current benefit 12% 43% 36% 8%

27 Technology potential benefits Interest in emerging tax technologies On the radar Potential benefit Likelihood to invest in Visualisation and dashboarding 51% 20% 30% 15% 22% Big data 42% 13% 28% 10% 20% Robotic process automation 28% 8% 17% 5% 11% Expert systems and cognitive computing 20% 6% 13% Already using/ investing in Not currently using but has potential 4% 7% Very likely to invest in Fairly likely to invest in Visualisation/dashboarding and big data are the technology areas seen to have the most potential benefit Robotic process automation and expert systems & cognitive computing remain more niche 27

28 Summary 28

29 Summary Overall burden Burden on tax teams has increased Many departments struggle to cope with the immediate and urgent Declining satisfaction Overall satisfaction with existing operating models has declined dramatically Method 1 continue to face challenges to achieve control and efficiency However, MNCs with method 3 TOMs have become much less satisfied Search for efficiency Process efficiency is seen as a way to cope better with an increasing workload It feels somewhat elusive but is seen as increasingly important going forward Technology Technology is seen as able to help in improving data quality and efficiency. The emerging areas with the most promise are visualisation, dash-boarding and Big Data. 29

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