Structure the tax function

For a long time, the indirect tax profession has been an individual sport. Due to changes in the tax market and in client needs, the tax profession has evolved into more of a team sport.

What has changed over the years?

The changing world from an adviser's perspective

What is different nowadays? 

When I started around 20 years ago, indirect tax specialists were scarce, there were hardly any in-house indirect tax functions and content, which nowadays is freely available on the Internet, could still be sold.

"In the land of the blind the one-eyed man is king"

An adviser could work more reactively. A comparison can be made with a doctor who has patients in the waiting room, can diagnose the patients, can find the problem and can then prescribe some pills to remedy the situation. We had full access to all kinds of VAT planning schemes, and the tax profession—both the buyer as the seller—was much more product-focused.

As advisers, we were targeting new patients. Many consultancy firms companies sold VAT content-based knowhow. In the past, that system was closed. Only a few organizations had access to specific content - often gathered via their worldwide network of people. At that time and under those circumstances, the content still represented significant added value for the client and therefore market value.

The system evolved from closed to open due to internet innovations such as search engines, and more people started to contribute and share content. Information can be posted, forwarded, shared and communicated. This is all free of charge: all kinds of content can be searched, found quickly and is available 24/7 as long as you have internet access.

Let’s do an exercise. Look back 5-10 years ago and think about the basic content that clients were willing to pay for and that content providers are now providing free of charge. Use Google’s search engine and enter that same question. What do you see? Google probably already has the answer to your question.

The consequence is that prices are going down and that the life cycle for this kind of paid product is at an end. Everybody can search and find it himself. The current impact of Google and Wikipedia is already huge since, from a pricing perspective, much content has become less valuable or even worthless.

When I started, the (starting) salaries were much lower, and that meant lower charge-out rates. Increased salary is one of the reasons why tax professionals now must grow up more quickly. A higher salary means a higher charge-out rate, and from the client’s perspective, a higher bill means higher expectations.

We must deliver higher quality and higher practicality; this is just a fact of life.

The changing world from the client perspective

In addition to the introduction of anti-abuse law, clients themselves (and their needs) have also changed. To continue our analogy of the doctor, the patients have become doctors themselves by setting up their own in-house indirect tax functions.

Thanks to tax industry networks and social media, tax knowledge is shared and communicated within the industry. The result is that the service and the ability of an external adviser have had to evolve as well. Changing client needs have also resulted from factors, including:

• globalization
• the use of tax technology
• scandals such as the global credit crisis and Enron
• increased tax authority scrutiny, etc.

Discussions regarding accountability put both the external adviser and the in-house indirect tax function in a more proactive mode.

One man's weakness, is another man's strength

Because of these changes, technical tax expertise has become more a basic skill from the adviser’s perspective. The soft skills of the adviser are—and will become—the key differentiator. Due to all of the technological developments, this is already part of our present and future.

Technical tax advice must be implemented in systems, processes and controls. Instructions must be given to people who are outside of the tax function. Alignment with the business is essential for the tax function to plan in a timely manner and to avoid future firefighting.

In order to challenge and support a client in his mission, an adviser should possess—in addition to excellent technical skills—a clear understanding of communication and collaboration, project management, change management, information technology, negotiation and leadership.

All of these skills are needed in order to be successful.

The indirect tax profession has been an individual sport for a very long time. The profession is still about the individual’s technical tax strength and personal practical experience, and the future generation of advisors are often trained by that individual.

It is my opinion that the indirect tax professional of the future will need to take a different approach.

Why? 

It is simply no longer possible to excel at everything regarding global indirect tax management. Thus, some people can excel in certain areas of indirect tax, and the overall outcome of the team’s effort will make the real difference from a quality standard perspective.

In other words: "One man's weakness, is another man strength, so let's team up"

The right skills and priorities

For large companies, it is often not a question of the right skills, but more whether those skilled team members are sufficiently focused and whether they have the time and information needed to plan effectively. More often than not, tax functions spend their time on necessary compliance and reporting matters, or collecting and reworking the information needed for planning and forecasting.

The indirect tax department needs to consist of the right number of tax personnel and the right level of skills and capabilities to be successful. In order to realize the mission statement in the tittle of this paragraph the following also needs to be assessed to test whether set objectives can be actually realized.

• Are the right tax competencies available?
• Is enough skilled tax personnel available?
• Is training and specialization available?
• Is there access to external expertise in a timely manner?
• How is attracting and retaining experienced indirect team managed?
• Is there sufficient budget available to realize objectives, considering the tasks and responsibilities assigned to our tax department?

Written by Richard Cornelisse, one of the articles published on Global Indirect Tax Management