Establishing easy and transparent access to data has always been critical for finance and tax leadership, which need access to information across the length and breadth of their organizations to effectively fulfill their functions.
While siloed data has historically been a challenge faced by tax professionals, they have often lacked the available budget to address that pain point—something that new regulations and new technologies are changing, according to Daren Campbell, EY Americas’ tax technology and transformation leader. The joint pressures of new tax requirements such as Pillar 2—or shifting standards from entities such as the Financial Accounting Standards Board—as well the impetus to integrate more automation into finance are enabling leaders to make a better argument to get the funds they need.
“A lot of how tax is building out the business case with the C-suite is, is they're using things like Pillar 2 and saying, ‘hey, we need to report on a greater amount of data than we've ever had to report on. I need a way to do that,’” he said. “And that's what's getting them some of the budget and the funding to be able to move forward with building out their data capabilities.”
New rules, new appreciation
Opening those data siloes for tax is more crucial than ever, especially as new regulations like Pillar 2 increase both the volume and complexity of the data tax teams need. An EY survey released in November found that while 86% of leaders in tax and finance rated AI, tech and data as a key priority, 45% pointed to an inability to execute on a “sustainable” plan surrounding those three things as their biggest stumbling block when it came to fulfilling their tax function’s vision and purpose.
Those increased reporting requirements, however, are also leading to a “greater appreciation” for the tools and information the tax function is requesting. Leaders in other areas of the business are beginning to understand that “this is something that tax needs, or that's going to create risk because they won't be able to meet some of the reporting deadlines,” Campbell said.
Campbell has had a nearly three-decade career at the Big Four firm, taking on his current role as tax technology and transformation leader in July 2022, according to his LinkedIn profile. He has also led EY’s Americas Tax Innovation Council since November 2018, a collection of 37 tax professionals focused on helping to “infuse a culture of innovation at EY,” according to LinkedIn.
As tax and finance leadership preps for these new requirements, EY is seeing more companies begin to take second looks at their data strategy, building “data lakes” or “data hubs” where information is centrally accessible, he said. That includes examining how AI and automation can be tapped within tax, but Campbell sees two main barriers currently preventing companies from getting to the “transformative stage” of AI — where it is creating significant change. Siloed data is the first challenge, but the second hurdle surrounds processes, he said. In order to “take full advantage of AI, it's not just a matter of putting AI into an existing process,” Campbell said. “You have to think about it a little bit differently.”
“Maybe in the manual process today, it's six layers of review, and by using AI, due to the consistency and some of the other insights the AI can give you… you're able to have two or maybe even one level of review,” Campbell said.
Tax and the CFO
Tax leaders are among those facing the pressure to implement AI further into their function. With the increased regulatory requirements, companies need to make increased investment, but “there's kind of a blanket expectation that costs are going to drop a significant amount because of AI, that cost of compliance is going to come down,” Campbell said. “So the tax function is feeling that pressure, and I'd say passing it through to the tax providers as well.”
One way to help alleviate the pressure is by getting the support of the CFO. In Campbell’s observations, tax has “not done a very good job” explaining the enterprise value it can bring. While there’s been more discussion surrounding tax as a strategic element, the function has “often been viewed as really just kind of a compliance cost center.”
EY has worked with tax leaders to shift that perspective and help them “bring a compelling business case to the CFO about why tax needs to be included” from the onset of certain projects, such as ERP transformations, he said.
On the CFO side, it’s important to make sure tax has that seat at the table, Campbell said, because “while tax is generally a downstream activity, the items that trigger tax are all upstream, and so the more involved that tax can be in an overall transformation discussion,” whether an ERP transformation, supply chain shift or procurement, “the more value they can bring to the enterprise.”
