Charles Darwin, the Father of Evolution said 'it is not the strongest or the most intelligent who will survive, but those who can best manage change'. For good or bad, this Darwinian concept finds strong applicability today in the world of tax.
The tax function, the environment that they operate and expectations from them have undergone significant changes especially over the last few years. These changes have transformed the very skill sets required to operate the tax function of a company and only those tax functions which deal well with these changing skill set needs may survive the transformation and disruption. Let's take a step back and remind ourselves of what a typical tax professional did traditionally and reflect on what has changed now.
Your traditional tax professional interpreted the tax law and applied his knowledge to determine the tax obligations of the company he/ she served. A tax professional with expert level tax knowledge and working level accounting knowledge was therefore considered amply qualified. Most of this application of tax knowledge was done on summary level data which was provided to the tax team. The tax authorities also traditionally looked at summary level data and dug into details only on an exception basis (in which case accounting/ finance teams got involved).
But all this has changed. At the forefront, behaviours and expectations have changed. 'Digital trust' is growing. People are accustomed to having information at a click of a button and expect the same from everyone with tax teams not being an exception anymore for large organisations. Therefore, tax teams can no longer be a 'black box'. To add to this, tax authorities now have an ocean of data at its fingertips on which sophisticated data analytics is applied to identify potential tax leakages and anomalies. Technology has enabled tax authorities to pick a needle out of a haystack and conduct assessments at extremely granular levels.
Tax professionals today therefore need to respond to their organisation's needs and be able to consume data at the same level at which tax authorities do. Towards this, they now need to know both their data and the processes that create their data better. Tax professionals therefore need to add a few more tools to their 'skill kit'.
While this was our take, we thought who better to approach than corporates to get a practical sense on the topic. So we recently conducted a survey. Over 90% of top corporates in the survey believe that core competencies of tax teams will shift from tax and technical skills to process and technology skills over the next three years. I am scared to hear (being a tax professional), but hesitantly, I fully agree.
So, what does it take to make the shift? Before the 'skill-set change', must come a 'mind-set change'. Tax teams in companies will need to step out of their comfort zones and start addressing newer problems around tax function strategy, processes, data quality, audit readiness, etc.
To answer and address some of these questions, tax functions will need access to skill sets which were not traditionally part of tax teams. For instance, process experts who can look at tax processes, identify potential risks and build controls to mitigate these risks are additively required. Data scientists who can study the current data architecture of a company and redesign to meet today's tax needs would form a very handy part of the tax team. Implementing the right processes and data architecture takes technology skill sets. There are a number of exciting areas to which technology can bring a range of value in tax - including data validation, identification of tax risks/ opportunities, comfort on completeness, managing workflow, staying in readiness for scrutiny, etc.
Given that tax laws and reporting requirements are constantly evolving, these skill sets will be required on an ongoing basis (and not just as a one-time exercise). The need of the hour is for tax professionals to transform themselves into multi-faceted tax specialists who have expert tax knowledge combined with a working knowledge of process, data and technology. Incrementally or alternatively, tax teams need to also involve specific process and technology experts who can speak the language of tax.
While this is all new, change in itself is the only constant thing (and history repeats itself, although sometimes in subtle ways). Around 15 years back, when I applied for my first job, I remember proudly including 'Microsoft Excel' as a skill in my CV. Today, Excel is a way of working and no longer even considered as an incremental skill, it is almost synonymous to literacy. The day is not far away when robotics, advanced automation, data processing would be considered as part of basic tax/ accounting skills.
What next? One way or another, companies will need to re-look at their tax team composition and re-define skill set requirements. Yes, addressing the 'skill set gap' within tax teams is definitely a difficult problem to solve. The hardest part is that these incremental skill sets are very rare and hard to come by. To add to this, inducting these skill sets and managing career path is quite challenging (and comes with a cost). But if something in the job profile of a tax professional has not changed, it is the ability to solve difficult problems. And wouldn't you agree that difficult problems are generally the ones most worth solving?
Jitesh Bansal, National Leader, Tax and Finance Operate, EY India