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, , from the 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. 鈥淣ot being able to be in the office together and鈥� have those in-person discussions can be difficult when you need to deal with sensitive information or highly privileged or confidential information,鈥� Roberson said, adding that in this situation, electronic communications can be problematic.
鈥淭he last thing you want is to have multiple emails with some of these sensitive topics,鈥� Roberson explained. 鈥淚t 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.鈥�
Further, workers need to be careful with what鈥檚 in their email or even what鈥檚 in their texts, he said, adding that the current situation entails 鈥渞eally trying to remember how you were doing some of these things before the pandemic hit and making sure you鈥檙e continuing to take steps to preserve and protect your privileged matters.鈥�
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. 鈥淯nlike a conference call鈥� where you鈥檙e not quite sure who鈥檚 there, with these web-based platforms you know exactly who鈥檚 there,鈥� Gomez said. 鈥淭hat helps you to assure yourself that only the people who are supposed to be in the conversation are there. That鈥檚 certainly helpful for maintaining the integrity of your corporate information.鈥�
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. 鈥淩ight now, the No. 1 priority is reducing costs and promoting efficiencies in tax administration,鈥� Fitzpatrick explained. 鈥淎 close second was reducing cash tax payments or the effective tax rates. We saw a huge鈥� increase in the number of respondents who said this is a priority for them 鈥� and a whopping 84% of respondents indicated cash management and liquidity were a mandate.鈥�
You can access the full webcast, , from the Tax Executives鈥� Institute here.
Given the current environment, you can see why these issues have 鈥渢ruly been a big emphasis in how they鈥檙e spending their time,鈥� 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 鈥渁 real opportunity for corporate tax leaders and their teams to show their value (and) make sure their company is getting the best representation,鈥� 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 抖阴成年, said 抖阴成年鈥� research found a similar dynamic. 鈥淲e also saw (a focus on) reducing tax liability and needing to be in an advisor position鈥� and providing commercial advice to the business,鈥� Hart Shepherd said, adding that cost reduction, finding efficiencies, and ensuring data quality were also identified as important.
鈥淚f we look at what came out as the most pressing concern, it鈥檚 really the resource limitations,鈥� Shepherd noted. 鈥淏efore 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鈥檚 even more difficult, especially considering that recruitment has generally gone on hold.鈥�
Tax technology
抖阴成年 research unearthed a new approach to the adoption and use of technology in the corporate tax department, Shepherd explained. 鈥淛ust before COVID, the top two strategic priorities were dealing with tax reform and implementing new technologies,鈥� she said. 鈥淎fter 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.鈥�
The survey also found a strong need for tech expertise on the corporate tax team. 鈥淭here is a huge, huge emphasis on proficiency in technology systems,鈥� Shepherd said, adding that 72% of respondents said technology is the top skillset needed, and proficiency in financial reporting came in at 48%. 鈥淭here was emphasis on data analytics and modeling 鈥� those are really top desirable skills.鈥�
Staffing & sourcing
Bloomberg鈥檚 Fitzpatrick agreed, saying her research showed similar results around hiring. 鈥淧re-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,鈥� she said.
鈥淭he 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,鈥� Fitzpatrick continued. 鈥淐orporate tax leaders clearly have to be creative and maximize their productivity and the resources they鈥檙e using in order to generate the greatest value.鈥�
Panelist Michael Colagiovanni, a partner at Grant Thornton, said many tax departments are uncertain now how to manage workloads and get things done. 鈥淲hen 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鈥� there is a lot of difficulty in trying to get work done,鈥� 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.
鈥淐ompanies have started to look at their different sourcing options,鈥� Colagiovanni said. 鈥淚t鈥檚 not meant to replace people, it鈥檚 really more to shift the focus of what they do 鈥� away from activities that aren鈥檛 value-added, like a tax compliance project or data gathering, and moving responsibilities to activities that are strategic to the organization.鈥�
