The Rising Cost of Tax Compliance

Recent research and expert opinions highlight the growing complexities in tax compliance for businesses, emphasizing the need for CFOs to adapt to a rapidly changing environment.

Key Insights:

• Large multinational enterprises spent an average of $25.6 million per company on income tax compliance in 2022-2023, according to a Tax Foundation survey.
• Businesses collectively spent $537 million on income tax compliance, including foreign, federal, and state/local taxes.

What's Driving the Change?

Several factors are contributing to the rising costs and complexities in tax compliance:

1. Regulatory Complexity: New tax laws and international regulations have added layers of intricacy to compliance processes, making it more challenging for businesses to stay compliant.
2. Data Management Challenges: Companies face difficulties in managing vast amounts of structured and unstructured data, often referred to as "data swamps," which complicates compliance efforts.
3. Technological Expectations: As tax regimes evolve to be more real-time, there is an increasing expectation for faster and more comprehensive reporting.
4. Talent Acquisition: The demand for tax professionals who possess both tax expertise and technological skills is growing, as organizations seek to navigate the complexities of modern tax compliance.

Shifting Paradigms in Tax Compliance

Ray Grove, head of product, corporate tax and trade for Thomson Reuters, highlights a significant shift in tax compliance:

Grove emphasizes that today's tax regimes are becoming "more real-time and more advanced," putting pressure on organizations to adapt quickly.

Challenges for CFOs

1. Data Management: Companies must navigate "data swamps" of both structured and unstructured information to meet compliance needs.
2. Technological Adaptation: While automation can help, it also raises expectations for faster and more comprehensive reporting.
3. Talent Acquisition: Grove notes, "The tax professional of tomorrow is...somebody who's a technologist as much as they are a taxologist."

Looking Ahead

CFOs must reassess their approach to tax compliance, considering:

• Whether to outsource certain processes
• What tools are needed
• How to acquire talent with both tax expertise and technological skills

For further insights, read the full article by Jim Tyson on CFO Dive and explore the findings from the Tax Foundation survey here.

How is your organization preparing for the future of tax compliance?