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Corporate Tax Departments

In the COVID-19 era, corporate tax departments focus on security, cost-cutting, cash management & shifting priorities

Thomson Reuters Institute  Insights, Thought Leadership & Engagement

· 6 minute read

Thomson Reuters Institute  Insights, Thought Leadership & Engagement

· 6 minute read

How is the pandemic affecting corporate tax departments and forcing them to address issues from staffing levels to technology utilization while having to do more with less?

A new webcast, COVID-19: The New Normal for In-House Tax Professionals, from the Tax Executives’ Institute dove into this question and offered some key takeaways for corporate tax department leaders to think over.

Protecting sensitive information

Panelist Andy Roberson, a tax lawyer at McDermott Will & Emery, noted the security risks that arise when people work remotely. “Not being able to be in the office together and… have those in-person discussions can be difficult when you need to deal with sensitive information or highly privileged or confidential information,” Roberson said, adding that in this situation, electronic communications can be problematic.

“The last thing you want is to have multiple emails with some of these sensitive topics,” Roberson explained. “It really is important in these times to remember that conversations we used to have in person are ones where you may need to pick up the phone.”

Further, workers need to be careful with what’s in their email or even what’s in their texts, he said, adding that the current situation entails “really trying to remember how you were doing some of these things before the pandemic hit and making sure you’re continuing to take steps to preserve and protect your privileged matters.”

Another panelist, Armando Gomez, partner at Skadden Arps, added that, from a security standpoint, web-based meeting platforms such as Webex are better than a traditional conference call. “Unlike a conference call… where you’re not quite sure who’s there, with these web-based platforms you know exactly who’s there,” Gomez said. “That helps you to assure yourself that only the people who are supposed to be in the conversation are there. That’s certainly helpful for maintaining the integrity of your corporate information.”

Cost reduction & cash management

Lisa Fitzpatrick, president of Bloomberg Tax and a member of the panel, noted that Bloomberg research shows that tax department priorities have shifted sharply since February as a result of the pandemic. “Right now, the No. 1 priority is reducing costs and promoting efficiencies in tax administration,” Fitzpatrick explained. “A close second was reducing cash tax payments or the effective tax rates. We saw a huge… increase in the number of respondents who said this is a priority for them — and a whopping 84% of respondents indicated cash management and liquidity were a mandate.”

You can access the full webcast, COVID-19: The New Normal for In-House Tax Professionals, from the Tax Executives’ Institute here.

Given the current environment, you can see why these issues have “truly been a big emphasis in how they’re spending their time,” Fitzpatrick said, adding that with all the changes across jurisdictions, including legislation like the CARES Act that has provisions specific to giving business relief in areas like net operating losses, you can see why this is a priority area.

Indeed, pandemic-driven legislative, operational, and strategic change creates “a real opportunity for corporate tax leaders and their teams to show their value (and) make sure their company is getting the best representation,” Fitzpatrick explained, adding that this is best accomplished through integration and alignment with business stakeholders.

Panelist Lisa Hart Shepherd, vice president for research and advisory services at Thomson Reuters, said Thomson Reuters’ research found a similar dynamic. “We also saw (a focus on) reducing tax liability and needing to be in an advisor position… and providing commercial advice to the business,” Hart Shepherd said, adding that cost reduction, finding efficiencies, and ensuring data quality were also identified as important.

“If we look at what came out as the most pressing concern, it’s really the resource limitations,” Shepherd noted. “Before COVID hit, we found that more than half of corporate tax departments said they were stretched; and now, obviously, with these even greater challenges and a work surge, it’s even more difficult, especially considering that recruitment has generally gone on hold.”

Tax technology

Thomson Reuters research unearthed a new approach to the adoption and use of technology in the corporate tax department, Shepherd explained. “Just before COVID, the top two strategic priorities were dealing with tax reform and implementing new technologies,” she said. “After COVID struck, we went back out with a pulse survey and tax reform was still in that No. 1 position, (but) new technology had definitely been put on hold. It was replaced with working harder to integrate existing technologies that [tax teams] had invested in and making better use of those systems.”

The survey also found a strong need for tech expertise on the corporate tax team. “There is a huge, huge emphasis on proficiency in technology systems,” Shepherd said, adding that 72% of respondents said technology is the top skillset needed, and proficiency in financial reporting came in at 48%. “There was emphasis on data analytics and modeling — those are really top desirable skills.”

Staffing & sourcing

Bloomberg’s Fitzpatrick agreed, saying her research showed similar results around hiring. “Pre-COVID-19, about 40% of corporate leaders said they had plans to increase hiring, and now, due to COVID-19, just 9% of our respondents said they would be hiring through the rest of this year,” she said.

“The percentage planning to reduce staff (rose) from 4% up to 27%, and a little over one-in-four said they have some sort of staff reduction they are dealing with,” Fitzpatrick continued. “Corporate tax leaders clearly have to be creative and maximize their productivity and the resources they’re using in order to generate the greatest value.”

Panelist Michael Colagiovanni, a partner at Grant Thornton, said many tax departments are uncertain now how to manage workloads and get things done. “When you have a tax department that already is lean, has a lot of work it needs to do, and is charged with (delivering) operational efficiencies… there is a lot of difficulty in trying to get work done,” Colagiovanni noted, adding that the CARES Act added a whole lot of new opportunities that were strategic to the organization, increasing the workload for tax departments.

“Companies have started to look at their different sourcing options,” Colagiovanni said. “It’s not meant to replace people, it’s really more to shift the focus of what they do — away from activities that aren’t value-added, like a tax compliance project or data gathering, and moving responsibilities to activities that are strategic to the organization.”

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