While these disruptors are changing the tax landscape, Liz L’Hommedieu, a principal in KPMG’s Washington National Tax, believes that along with the disruptors come new opportunities for banks’ tax departments to partner with the business to create long term value for the institution.
In this video, Liz defines how a best-in-class tax department can become a strategic business partner to the bank by capitalizing on these opportunities and drive value to the organization’s bottom line.
The past few years, we've seen lots of external factors that placing more demands on the tax function for banks. We've had regulatory changes, we've had dramatic tax reform, and all of these have put stress on the tax function to evaluate the impacts and strategically plan for the changes that these laws have on both the banks and their customers.
At the same time, a lot of the macroeconomic drivers that are leading banks to make changes on the enterprise-wide level are also impacting the tax function at the departmental level. Tax departments are not immune to cost efficiency imperatives, and digitization initiatives are disrupting the manner in which tax departments operate. Business as usual is changing, and all of these disruptors are changing the tax landscape.
Many banks' tech directors have started re-imagining the future-state operating model. They focus on a couple of key areas, including solving the data problem. Tax is one of the largest users of financial data. The tax function is routinely faced with the challenges of obtaining and analyzing large data sets. While technology helps us with the volume of data, we still have issues because the data comes from such diverse owners and systems which are often siloed across the organization.
And while technology can be a key to solving the data problem, it's also important for tax to look inward making data technology decisions. Additionally, tax should work closely with the finance and IT functions as they collaborate on large scale transformation initiatives, and these are happening across banking, and these transformations will impact the data required for tax purposes. It's important for tax to be at the table as part of these transformations.
Another key area of focus in re-imagining the tax department is developing high-performing teams. With the adoption of new technology in the pressure to do more with less, tax directors are faced with the challenge of how to develop and maintain high-performing teams. Of course, hiring and training decisions are central to this effort, but in addition, a lot of tax directors are re-thinking how to leverage third-party advisors to supplement their current teams to meet new or unique demands on the tax department.
Striking the right balance is important. You need to optimize internal talent while supplementing with external resources, and ultimately the right mix depends on internal skill sets of each organization and the organization's overall goals.
No single operating model works for every bank, and tax directors need to consider the specific goals of their own organization and the goals of their stakeholders when determining and defining their target operating model. Essential to the overall theme of re-imagining the tax department, is the need for banks to define a strategy and set clear goals for the tax department. This will allow tax to meet the challenges of our ever evolving industry landscape.