Corporate Tax Management

Transcription

1 Corporate Tax Management Current trends and solutions 6 May 2014 Mark D. Schutzman Partner Tax Performance Advisory EY mark.schutzman@ey.com

2 Agenda I II III Historical perspective The business environment for today s tax function Current trends Finance transformation Financial reporting transparency / granularity ERP implementation / upgrade Spreadsheet innovation Content management Tax risk management framework Shared services Transfer pricing Technology & data An integrated tax technology vision Page 2 6 May 2014 TEI Corporate Tax Management

3 Historical perspective Why a renewed CFO focus on tax operations? Page 3

4 Historical perspective The business environment for today s Tax function A decade of steadily increasing regulatory requirements Sox 404 execution evidence Tax Function Trends Internal control deficiencies have stabilized FIN 48 / IRS UTP disclosure e-filing FATCA Short term business traveler Dividend repatriation Reportable transactions Transfer pricing audits Tangible property regs Affordable Care Act Shorter financial close cycles Pending country by country reporting Increasing pressure to prove controls execution Increasing need to forecast and model scenario s Increasing tax audit burden (IRS, states, non US jurisdictions) Data quality and access challenges Ever decreasing financial close cycle time Low level use of financial reporting systems for tax data Well established protocol - audit committee presentation(s) Pressure to manage cost Page 4 6 May 2014 TEI Corporate Tax Management

5 Historical perspective The business environment for today s Tax function Steadily increasing regulatory requirements = Tax functions have more work to do Tax accounting risk tolerance remains low down = you need to get it right, no surprises Tax jurisdictions are increasingly aggressive in pursuit of revenue = you are spending more time on controversy, audit defense and tax policy Personnel: flat headcount coupled with = pressure to do more with static ti looming retirements and inadequate resources and preserve critical succession plans institutional knowledge Convergence of these events has led many companies to focus on ways to improve the operational effectiveness of the tax function Page 5 6 May 2014 TEI Corporate Tax Management

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7 Finance transformation Risks Tax data sources will be disrupted 1. State apportionment 2. Indirect tax 3. Chart of accounts 4. Legal entity trial balances Can you afford to be left behind organizational improvement? Tax is easily forgotten Opportunities Reduce time spent collecting and reconciling data Reinvest efficiencies in: 1. Addressing regulatory reporting requirements 2. Integrating an acquired company 3. Model impact of new product / service or geographic expansion 4. Audit currency 5. Tax policy Page 7 6 May 2014 TEI Corporate Tax Management

8 Financial reporting transparency and granularity If you are experiencing Requests for varying consolidations, financial roll-up s (e.g., state unitary groups, country specific disregarding legal entity, regulated entities) More details in support of tax computations Surfacing from: 1. Tax auditors 2. Independent auditors 3. Industry regulatory agencies Operations oriented solutions Devote more people to the task (not sustainable) Improve your reporting agility by: 1. Ensure controllers capture the requisite level of detail 2. Develop skills to self-service reports from ERP, Essbase, SAP BW, Cognos, TM1, Oracle SmartView, Business Objects, QlikView and other BI apps Page 8 6 May 2014 TEI Corporate Tax Management

9 ERP implementation and upgrade Risks Falling behind in areas where you have made progress: 1. Preserving the legal entity reporting capability 2. State apportionment data capture 3. Indirect tax engine integration 4. Fixed asset module 5. Chart of Accounts changes 6. Thin ledger strategy leading to disruption of data sources Opportunities At a minimum - don t lose ground Influence the COA design and business rules Improve state t apportionment t data collection processes Tax depreciation ec efficiencies e c es Leverage the ERP ecosystem for efficiency gains Page 9 6 May 2014 TEI Corporate Tax Management

10 Spreadsheet innovation Typical spreadsheet challenges Innovation trends Single user at any point in time creating process bottlenecks Database back-end with Excel front end (e.g., Noetix, Vena, SmartView) Information / data not easily shared Control challenges: version, access Cloud versions that permit sharing, simultaneous use Key-person dependencyd Tax software as a data mart with bi- directional data transfer to/from Excel Performance gaps (e.g., linked spreadsheets, linked cells, hardcoded cells) Spreadsheets inappropriately used as data management tools Improved data management capability (e.g., PowerPivot) MS SharePoint integration Page 10 6 May 2014 TEI Corporate Tax Management

11 Content management Definition Trends and tools The structured organization, access and distribution of knowledge documents and their associated workflow. Typical components: Collaboration theme: A. Portal B. Dashboard C. Document management D. Process workflow Document management system adoption is in high gear Integrating workflow with document management is a powerful combination SOX controls execution evidence Data visualization Key issue discussion logs Page 11 6 May 2014 TEI Corporate Tax Management

12 Tax risk management framework The issue Regulator inquiries into the audit of SOX tax controls. Example: How do you really know, Tax VP, that you ve captured all uncertain positions and have them appropriately valued? The response Increasingly, tax functions are developing so-called Tax Risk Frameworks. Content examples: Embed tax risk thinking in all aspects of the tax life cycle. Ensure protocols and communications elevate issues. Implement processes to understand global accounting implications of tax disputes. Establish governance to understand the implications of changing business models and transactions. Establish processes to obtain and retain the right talent to deal with controversy and risk management. Identify documentation that will be viewed by multiple tax administrators. Consistently maintain timely inventory of business decisions and transactions that have controversy potential. Define and document procedures and processes for handling a tax audit. Conduct a full global l assessment of current disputes based on key criterion. i Create and document processes to manage incoming inquiries from tax administrations. Assess the implications of actions on other jurisdictions, entities, and years. Determine if you have appropriate processes and resources in place for managing controversies. Page 12 6 May 2014 TEI Corporate Tax Management

13 Shared services Current state Impact on Tax function A well established trend that s here to stay with variations for near-shore and on-shore models Relatively slow adoption with several notable success stories Typical processes to migrate: 1. Sales/Use tax compliance Labor arbitrage benefits eroding in first wave locations, spawning SSC presence in new countries 2. Premium tax returns 3. Fixed assets 4. Inactive Fed/State pro-forma returns Turnover of SSC personnel remains a challenge Concern: lost opportunity to train less experienced staff Page 13 6 May 2014 TEI Corporate Tax Management

14 Operational transfer pricing The challenges Several trends Intercompany accounting executed Expanding resources focused on poorly transfer pricing and the TP audits Segmented P/L s difficult or impossible to obtain Global cost allocations are inefficiently managed with complex spreadsheets Booking transfer pricing via quarter or year-end journal entries creates risk for material surprises Spreadsheets don t enable modeling the impact of varying TP profit split or cost allocation methods Greater reporting transparency: 1) High level of global TP audits 2) OECD BEPS initiative Multi-function collaboration necessary to get it right (e.g., finance, controllers, tax, supply chain, legal) Emerging technology solutions that go beyond TP compliance to TP management Page 14 6 May 2014 TEI Corporate Tax Management

15 An integrated tax technology vision Page 15

16 Tax technology and embedded processes Tax Sensitized Upstream Systems Payroll Accounting Securities Systems Inventory Regulatory Reporting Equity Compensation R&D systems Finance source systems Automated data collection Process Management Technology - a web based portal Web enabled tax packages Document Management Data management / d t lit t l Tax Data Mart Legal Entity / Trial Bal Workflow Management Tax applications Legal Entity Manager Tax Provision Technology Return to Provision Reporting SEC Reporting: 10- K, 10-Q, Tax Footnote Audit Ready Tax Returns Fed and State Tax returns