Tax reimagined - Level up or it's game over

30 March 2018
By Pauline Lum, Tax Executive Director, PwC Malaysia

Digitalisation has made it convenient and easier to access information, resulting in increased efficiency and competitiveness. As a result, it has become more important than ever, for you to differentiate your business to stay relevant while remaining compliant in an increasingly regulated marketplace.

Likewise, your tax function too will need to transform to support the rest of your business. It should no longer be seen as merely a cost centre.

What will the tax function of the future look like?

Tax functions will be agile and move in tandem to support the rest of the business with strategic decision making; replacing historical perceptions of tax functions as cost centres.

Tax functions will spend less time on tax compliance and reporting with the following enablers for effective management of tax risks.

Lack of good quality data for tax reporting purposes tends to be the main culprit that impacts the efficiencies of a tax function, increasing time spent to meet compliance requirements.

If data can be tax enriched coupled with other tools like technology and good governance, this will enable tax professionals to be more agile to partner the business on strategic decisions.

Assessing where you are before you level up

As shared earlier, with an increase in regulatory and business requirements, tax functions will need to level up and remain relevant. Tax functions will need to reassess the now to get ready for the future.

To develop a game plan to level up, your current state has to be assessed, coupled with ideas of your desired future state.

We believe that the value of a tax function increases with its level of maturity. There are five levels of maturity.

Level 1: Initial
You have no formal framework for tax. You are reactive to incidents with basic software to assist you in tax compliance.
Level 2: Informal
You have a simple, unstructured approach to managing tax, with basic software (slightly more sophisticated than level 1) to assist you in tax compliance.
Level 3: Standardised
You have uniform processes and policies in place (executed based on personal experience), with basic software and simple integrated enterprise resource planning (ERP) to assist tax compliance and management of tax data.
Level 4: Managed
You have a structured approach, using predictive analytics/ tools and an integrated ERP to manage tax compliance and risk in a proactive manner.
Level 5: Optimised
You have formal policies and frameworks in place, with tools that enable real time prescriptive analytics to support strategic decision making.

Tax reimagined

One size does not fit all - an indication of your level of maturity helps you chart your road map to level up. Whilst most companies expect their tax functions to be agile to partner and move in tandem with their business, there could be different starting points to achieve that desired end state.

For instance, some companies may need to automate and increase the use of technology to unlock time, so that the tax function is able to spend less time on compliance and more on support for strategic decisions.

However, some companies may not have developed a tax function (i.e. accountants double hatting as Tax custodians) and need to focus more on the framework and upskilling the personnel.

Is your tax function ready to cope with the demands of the business and tax regulators? It’s time to level up. I will discuss how to develop a game plan to meet the tax reporting requirements of the future in my next blog post.

Taking the first step to dealing with your tax challenges of tomorrow, starts today.
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