In today’s time where the world has evolved to a stage where we are heading to virtual and remote models of the service delivery due to the recent scenario of COVID-19. The organizations have started prioritizing their different areas of work, workforce, and workplace to be successful in furtherance of the value of shared services andtransforming existing modelsincreases the efficiency by reducing the costs and driving greater business value. Apart from expanding the traditional functional scope, the companies are developing specialized capabilities such as analytics, reporting, digital, and enhancing the customer experience.
These shared and global business services are creating an environment where new capabilities can be easily adopted to position customers for success. Organizations are changing the way they look at talent, incorporating diversity within their leadership, driving better employee experience and culture, and focusing on work/life balance and flexible practices as key strategies for retaining talent.
For the organization to achieve efficiencies in cost centres, transformation of different department is being explored. Out of all the departments in a business, tax department is one of the most important functions for any organisation. Without any form of control over tax positions and tax compliances, the company would be unable to have robust business practices.
Nowadays, Companies are looking at their short-term and long-term requirements to efficiently and effectively manage their tax operations by taking bold and creative approaches to position tax to meet the needs of their organization for both, today and the future.
As per current scenario, tax and their operating models are at an inflection point, more now than ever, and are significantly challenging current tax operational strategies. It has become critical to have a tax and finance function with the right mix of people, process, technology,data and KNOWLEDGE. Significant management focuses mainly on capital investmentneeded to achieve this in-house. Is there a better way to do it?
Yes, Transformation of the Tax Function is the answer to this question. Now the question is how can we transform the existing tax function. The answer is Outsourcing or co-sourcing of the Tax Function.
Outsourcing is a business practice of hiring a party outside a company to perform services or create goods from end to end that were traditionally performed in-house by the company’s own employees and staff along with consultants.
The practice of outsourcing is controversial in many countries arguing that it can cause loss of domestic jobs. Supporters say it creates an incentive for businesses and companies to allocate resources where they are most effective and efficient. This practice can affect a wide range of jobs, ranging from customer support to manufacturing to the back office, but only on the bottom level.The higher level of the different departments enjoy their position by getting consultation from the outside sources.
If we look into the present structure of the organization it is more of a triangle shape, where we have a very intellectual group of tax leaders on the top followed by the management personnel which is again followed by a large number of staff at the executive level.
Transformation of the tax function helps the organizational structure to reduce the execution / manager level staff and the energy of the company saved can be used in other departments.
Outsourcing the part of tax function of the organization will not affect the positions of the tax leaders or the management personnel but only affect the mid or lower layer of the hierarchy. Transforming the tax function helps the tax leaders and managementof the organization through guidance and consultation regarding the tax compliance and advisory of the company.
Tax transformation trends survey by Deloitte 2021, 44% of C-Suite respondents see outsourcing as the most important strategy for a lower cost resourcing model
C-suite respondents see outsourcing as the most important strategy for a lower-cost resourcing model.
An array of internal and external forces is shaping the blueprints for today’s ideal tax functions. Chief among these factors are ongoing changes in the following areas.
The major benefit due to which the organization consider the transformation are :
With tax officers evolving through technology on the regulatory front, it’s difficult to imagine business being successful over the long run without making fundamental changes to their operating models. Outsourcing of functions will likely play a big role in those changes. Therefore, it is important for entities to start exploring the option to reap the benefit of better processing of functions and enhancing the scope of function leaders to provide more value addition to business.