How private company tax functions are becoming more strategic
Explore the results of a recent poll of private company CTOs to see how tax leaders are helping their functions become more strategic.
Private companies are looking to their tax functions to help them manage a growing list of challenges and opportunities. That will require new capabilities, new technologies, and new operating models. In this edition of聽Privately Speaking,聽we explore the results of a recent poll of private company Chief Tax Officers (CTOs) to see how tax leaders are helping their functions become more strategic.
The pressure on private company tax functions is rising. Today鈥檚 CTOs are being asked to contribute information and insight in areas far removed from annual failings and regulatory compliance. CTOs are now increasingly involved in helping the business manage changes in geopolitics and economics; supply chains and operations; corporate citizenship and environmental, social, and governance (ESG); talent and workforce; technology and data; mergers and acquisitions (M&A) and corporate development. The tax agenda is rapidly changing.
Is your tax function ready for what lies ahead?
The current geopolitical landscape as well as the tumultuous economy is affecting how private market and corporate taxpayers approach M&A. In a recent 乐鱼（Leyu）体育官网 survey of private company CTOs, 77 percent reported their organization had a medium to high appetite for M&A over the next three years.
The problem is that just 57 percent of private company respondents reported being confident in their tax team鈥檚 ability to undertake a formal M&A process.
To what extent to you agree or disagree that your internal tax team is equipped/adequately staffed/experienced enough to undertake a formal M&A process?
鈥淭he global M&A market has gone through notable changes through the pandemic. And, in the current interest rate environment, is becoming more dynamic and complicated. Private companies need to keep pace with disruptive change. And one of the main ways to grow new future-forward capabilities is through strategic acquisitions and partnerships. The tax function must be ready.鈥�
-Conor Moore, National Leader, 乐鱼（Leyu）体育官网 Private Enterprise
Another area that is requiring increased focus from tax leaders is ESG. Increasingly, tax is being seen as both a driver of sustainability and a key measure of it. However, currently, just over half (55 percent) of private company CTOs say they are actively engaged with the business to explore ESG-related risks and opportunities. Most expect to become more engaged in ESG issues over the next year.聽
To what degree is your tax department engaged with the business to explore ESG-related risks and opportunities now? What about in the next year?
鈥淐TOs are being challenged to meet ESG standards鈥攁djusting tax planning, ramping up reporting processes to address transparency demands, and demonstrating commitment to a sustainable approach to tax, while also taking advantage of green tax incentives. As expectations around ESG increase, the tax function will become an increasingly important and strategic player.鈥�
-聽Brad Sprong, Partner, National Tax Leader, 乐鱼（Leyu）体育官网 Private Enterprise
Do you have the talent?
According to our latest CTO survey, many tax leaders are struggling with key staffing and talent issues. The problem is particularly acute in private companies. Indeed, private market CTOs were 12 percent more likely than average to admit they are struggling to hire personnel for the tax department (68 percent versus 56 percent).聽
Interestingly, private companies are ahead of public companies when it comes to leveraging tax automation capabilities. Where 32 percent of public companies say they are using tech to free up human capital to focus on more strategic activities, 55 percent of private companies said they were.
Want to find out more?
Check out the聽乐鱼（Leyu）体育官网 2023 Chief Tax Officer Outlook Study here. It includes data from private and public sector organizations as well as quotes and insights from a number of market leaders.
鈥淭he current challenges finding tax talent, combined with the demand for more strategic services from the tax function, are putting a real squeeze on tax departments from a resource perspective. Tax leaders really need to be looking for opportunities to embrace technology so that their tax professionals can focus on more strategic activities that bring greater value to the organization.鈥�
-聽Brad Sprong, National Tax Leader, 乐鱼（Leyu）体育官网 Private Enterprise
What does the future tax professional look like?
With so much on the agenda, and technology playing an increasingly central role in the tax function, we are seeing a significant change in the skills and capabilities that companies are looking for when hiring tax professionals.
In our survey of private company tax leaders, 48 percent said they are shifting toward hiring tax professionals with a healthy background mix of tax and technology. However, the same number also admitted that this type of tax specialist is in high demand and short supply.
Thinking about the hiring requirements for your tax department, are you shifting towards hiring tax professionals that...
鈥淭he skill set required for today's professionals to deliver value and have a successful career in a modern tax function goes far beyond accounting and tax technical knowledge. We see leading tax departments embracing a 鈥榯ech-first, tax-second鈥� approach to hiring talent to support their organization鈥檚 future needs around data, technology, and analytics.鈥�
-聽Rema Serafi, National Managing Principal, Tax, 乐鱼（Leyu）体育官网 LLP
So are you using the optimal model?
Perhaps not surprisingly, the majority of CTOs are turning to some form of outsourcing or cosourcing to help navigate capability shortages. Our survey shows that today, just 18 percent of private companies rely primarily on in-house resources (with some use of advisers).
The most popular tax operating models for private market companies are those that rely on either a managed services alliance or a targeted or strategic outsourcing agreement.
How would you describe the target operating model for your tax function today?
鈥淧rivate company CTOs tell us they are leaning toward outsourcing because they want to reduce their costs and place more of their focus on higher value-added issues. They are also hoping they will get greater access to the type of advanced technologies that will help them deal with many of these fast-moving issues.鈥�
-聽Shivani Sopory, Partner, Audit, 乐鱼（Leyu）体育官网 Private Enterprise, 乐鱼（Leyu）体育官网 LLP
How 乐鱼（Leyu）体育官网 can help
When tax performance is put under a microscope, you need precise knowledge and the latest facts. When you're called on for a bigger role, you need insightful, forward-thinking perspectives. In times with greater demands for transparency, you need a steady, trusted hand.
乐鱼（Leyu）体育官网 Private Enterprise professionals understand the opportunities, challenges and complexities facing you and your privately held business. And our talent in local offices is available to assist clients with the full range of needed tax services including multidisciplinary tax planning, compliance, and tax technology tools.
From our Tax Planning and Business Strategy practices through to our Resilience and Change Management practices through to our M&A and Restructuring Groups, 乐鱼（Leyu）体育官网 Private Enterprise delivers a full range of services to help private organizations thrive in the current environment.
Dive into our thinking:
Check out the 乐鱼（Leyu）体育官网 2023 Chief Tax Officer Outlook Study
Download PDF