Securing tomorrow today Setting up the tax function to embed controls around people, processes and systems Wobke Hahlen Deloitte Netherlands Marvin de Ridder Deloitte Netherlands
Agenda Background & trends Tax transformation theory Tax transformation practice Critical success factors Recap
Background & trends
Changing roles
Finance transformation Tax: the rock stars of the bottom line Influencing events Negative press?? Budget pressure Shared Reduction Service Centre headcount Common challenges Ignoring the enhanced value tax can deliver Leaving potential profits from tax planning on the table Failing to take into account the tax implications of everyday business decisions Designing information systems without the ability to track tax-related details necessary for planning and compliance Accessing data, implementing effective controls, and creating tax-aligned systems Developing the organisation s ability to identify and to respond to changes in laws when enacted CFOs, too, are coming around to this way of thinking. Tax is a very important but often overlooked element of Finance Management. Its importance is twofold. First, getting tax calculations right is vital for finance execution. Second, tax can be a contributor to the bottom line. Source: Kennedy, Finance Management Consulting Marketplace 2009-2012 Communicating the tax vision to the CEO, Board of Directors, analyst community, and throughout the enterprise
Theory
The 4 enablers of the Tax Function 5
Capability maturity model Tax cycle (extended) tax function Tax Organisation Talent & People Policy & Process Information & Systems Stage 1 Stage 2 Stage 3 Stage 4 Processes not defined and inadequate Independent tax department Data gathering focused Tax roles and responsibilities are not differentiated Not well developed Informal Ineffective Data architecture not integrated Little automation Processes informally and inconsistently defined Not integrated across the organisation Limited communication and coordination between business units Broad skills are recognised Requires cross functional training Defined for preparing financial/tax information Inconsistently executed Use common platforms Reduced manual entry and adjustments Processes defined and integrated Errors not traceable to an owner Relatively centralised Strong coordination between business units Adequately trained Resources are deployed appropriately according to skills and business needs Integrated Not completely automated Reconciliation and financial analysis processes are executed quickly Able to rely upon integrated and automated information Processes defined and communicated Integrated: assigned to owners across the business Centralised and cost effective High synergy between different business units Continuously trained Focused on data analysis Proactively manages key business decisions Highly specialised and deployed appropriately Integrated Automated and accurate Integrated systems Customisable Automated and accessible through Finance/Tax portals
Elements to enable transformation Tax Strategy & Vision Tax Process Tax Organisation Finance/Tax Systems
Practice How to create a vision and roadmap
Tax Vision Tax 2020 Vision The organisation observes the world of today and the opportunities of tomorrow and outlines the desired state Mission Defines the right to exist and the identity of an organisation Enablers Means which can be used by organisations to achieve their goals
Tax Strategy Concrete actions Tax Type Current Situation 2013/2015 2020 Enabler Sub- enabler Improvement opportunities What do I need for my function End state Systems & Information Tax Organisation Talent & People Policy & Process Data & Systems Architecture Systems Implementation / Integration Application Management Security & Control Business partnering Organisation Design & Governance Shared Services & Off-shoring Outsourcing (advisory) Competencies, Roles & Responsibilities Training & Development Incentives, Retention & Succession Planning Recruitment Process Design & Tax Policies Process Improvement & Optimisation (e.g. Six Sigma, Lean) Accessibility & Awareness Compliance & Attestation
Example: Tax Roadmap 2020 Standardisation Topic 2013 2014 2015 Ambition 2020 E2E Manage Taxes Process T02 VAT Analytics T06 Tax Dashboard T05 Design Integrated Landscape T04 Data analytics (improvement initiatives) T05 Implement Integrated Landscape T01 TA Analytics T03 T&C Analytics T04 Data analytics T04 Data analytics Cycle time filing & reporting Accurate compliance & reporting Process excellence Sustainable monitoring and tax control Integration and standardisation of enabling landscape and system architecture Maintain tax master data T07 TP Clear guidelines for TP policy implementation into master data Maintain tax policies & procedures T09 T12 T14 T08 RACI GSA T13 T10 Process RACI T11 Central Repository Esc P&P Implement standardised processes Clearly defined roles & responsibilities and back-up structure Shared, standardised information, documentation, resources and policy & procedures Perform knowledge management Perform tax planning/strategy T15 Tax Learning T16 Scenario Planning T17 Tax Opt Study Sufficient, shared and sustainable tax knowledge and awareness throughout the global organisation Optimisation of sustainable tax planning and global tax cash optimisation Perform tax risk management T18 T19 Tax Risk Control Monitoring Standardised tax risk management process facilitated by automation Monitor tax compliance T20 DDT Insight in global tax compliance status Manage tax provisions Perform tax reporting Prepare returns (indirect) T21 UTP T23 T24 T22 Tax Pack Automate AP VAT add on Standardised and optimised UTP recognition and determination Automated (improved) tax reporting template for efficient consolidation and tax reporting positions Automated tax determination Identification Pilot Phase Roll-out Value realisation
Practice Starting with standardisation
Roll-out Pilot Implementation Design Tax transformation First steps 1. Design Standardised Tax Processes The level 4, 5 and 6 To-Be standardised process design and documentation for tax has been delivered Validation workshops Tax strategy workshop 2. Design RACI / Controls Design To-Be standardised RACI s and Controls for all tax processes on level 4, 5 and 6 3. Design Policies & Procedures Draft To-Be Tax Policies & Procedures Tax Policies & Procedures will be based on existing materials 4. Define Other (Sub) Enablers Functional design req. repository for shared, standardised processes, information, resources and policy & procedures Functional design req. dashboard to create clear overview of tax kpi s 5. Tax processes, RACI, Control Measures and Policies & Procedures Pilot implementation: 1. Selection of countries / entities / tax processes 2. Current state analysis 3. Fit-gap analysis 4. Implementation of Tax processes, RACI, Control Measures and P&P 6. Review/Analysis Pilot Implementation Pilot implementation review consisting of: 1. Evaluate of pilot implementation (1) start-up and design, (2) Implementation and (3) Handover, Operations and User Perspective 2. Lessons learned per key issue, lessons and action (to be) taken 3. Transition to Roll-out Roll-out 7. Tax processes, RACI, Control Measures, Policies & Procedures, Central Repository and Tax Dashboard 1. Remaining countries / entities / tax processes 2. Current state analysis 3. Fit-gap analysis 4. Implementation of Tax processes, RACI, Control Measures, P&P, Tax Dashboard and Central Repository 8. Remaining standardisation topics Roll-out (based on project charters) remaining standardisation projects
Tax transformation - step 1 Define tax processes Centralised data Strategy & Planning Maintain tax master data Maintain tax policies & procedures Develop global tax strategy Perform tax planning/ strategy Create execution plans for tax Monitor tax planning/ strategy Perform tax knowledge management Inquiries & Advice Risk management & Compliance Address tax inquiries Provide tax advice Manage tax provisions Perform tax reporting Perform tax risk management Monitor tax compliance Direct tax Indirect tax Wage tax Customs tax Prepare withholding taxes (direct) Prepare returns (direct) Calculate deferred taxes (direct) Prepare returns (indirect) Prepare returns (wage) Prepare returns (customs) Account for taxes (direct) Account for taxes (indirect) Account for taxes (wage) Account for taxes (customs)
Tax transformation - step 1 (cont d) Design standardised tax processes Level Level description Tax Process (example) APQC number (example) # of processes in tax framework 1 Indication of main functional domain Manage financial resources 2 The Process Group is a grouping of processes from a functional perspective 8 Manage taxes 8.9 1 3 A Process is a collection of related activities designed to produce a specific set of outputs.the outputs of a process maybe aimed to a set of different customers 4 An Activity is essentially a collection of related multi tasks within a process. The activity has a single specific output for a particular customer 5 A Multi Task is essentially a structural piece of an activity and can be broken down to tasks. Multi Tasks are themselves executed in some order within the activity (e.g. decisions, repetition, parallelism) 6 A Task is an atomic and unique step within an activity that cannot be broken down into more detailed elements. Tasks are themselves executed in some order within the activity (e.g. decisions, repetition, parallelism) Process taxes 8.9.2 2 Account for direct taxes 8.9.2.5 23 Collect and validate financial and supporting data Analyse and validate financial and supporting data 8.9.2.5.2 117 8.9.2.5.2.3 ~351
Process flow Level 4 8.9.2.2 Prepare direct tax returns Step 1 RACI (Re)design RACI on process step level 5 Step 2 Controls (Re)design Tax Controls
Process flow Level 4 8.9.2.2 Prepare direct tax returns Tax Policies & Procedures (Re)design tax policies & procedures Step 3 Topics (examples) Document storage duration, location, access Tax Compliance Planning, Source data, Computation Risk & Opportunities
Critical success factors
Tax transformation Critical success factors The finance/tax and technology organisations must be joined at the hip Be clear about goals Don t boil the ocean Visioning is completed at the beginning of the project Change management is critical It s about the data Run the project like you want to run the function
Recap
Tax transformation Recap Design standardised (tax) processes - efficiency Design RACI and controls linked to process steps control & accountability Design policies & procedures enables execution Design tax dashboard & central repository enabling insight and knowledge
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