Data management in the evolving tax function

Data management is playing an ever-increasing role in the tax function, with the composition of tax teams of the future potentially evolving away from its traditional look.  

UK business are venturing into development conversations about the tax function, with it not beyond the realms of possibility that the head of tax role could evolve into a data quality position in the next few years, according to Sam Dean, Head of tax risk management at Grant Thornton.  

A longstanding concern for tax, data is quickly becoming a significant driver for the development of the tax function. Tax authorities are increasingly adopting real-time data extraction and e-auditing, with a constant stream of new legal mandates. 

HMRC introduced Making Tax Digital (MTD) as the first phase of its digital transformation, aiming to have real-time VAT reporting by 2030.     

Although firms are holding these discussions, some businesses do not have the capacity to take time off its current compliance responsibilities. Dean believes it is a struggle for firms to then find the resources to “down tools” for a period of time and examine what the future holds for the tax function.        

 Speaking at the EY Future of VAT in the UK event, Ben Woodfield, UK Indirect Tax Associate Partner at EY, said: “For organisations the biggest difficulty they face is not the technology in the process, but I believe it’s the data.” 

Dean agrees with this point and believes there are a number of a businesses with  “good data testing processes, but the tax function is starting to think about the different skills sets they need going forward.    

In the past, Dean says the target would be to acquire some of the best tax technical people so they can apply the legislation and ensure the tax is correct.  

 “Now, it’s actually, we need some techie people, or actually, we might need some data analysts, or we might need a completely different shaped tax option in the future,” he argues. 

Professional development in the tax function        

Businesses have now begun to consider what professional development in the tax function looks like, notes Dean. 

“I think development within a tax function historically has been more of about technical capability, and don’t get me wrong, we’re always going to need technical capability in tax functions. 

“But we also need to start building some of these characteristics around leadership capability, digital skills, not even necessarily the digital capability to be able to do everything, but to understand the role it plays in their function, rather than it just be something that somebody else does,” says Dean. 

EY’s global tax controversy leader, Luis Coronado, believes this is an opportunity for a collaborative approach. 

“I don’t think I am going to become savvy in computer science and be able to work out solutions and so on, but firms of our size, and certainly multinationals of large sizes, will be able to expand their hiring abilities to bring in those technologies’ specialists and computer specialists etc, and collaborate.” 

While tax advisors understand how to interpret the legislation, they also have far less knowledge relating to data mining and data analytics, providing an opportunity to work together, he adds.    

Dean says: “At what point will the head of tax role not be a tax technical person but a data person or a data analysis specialist.  

In a few years, Dean debates that the role may be more of a data quality or data analysis role going forward.  

“ Those are the sorts of conversations that our businesses are starting to have and think about now,” he states.    

Capacity an issue for data quality    

Daphne Hemingway, VAT partner at TC Group, says data quality is a “luxury” item that many SMEs are unable to afford currently as many businesses are in “survival mode.”    

Additionally, Hemingway believes, even with the forthcoming real-time reporting requirement in the UK, the firms TC Group works with don’t see data quality as a priority yet. 

 “The making tax digital rules are a huge burden for some businesses which do not use sophisticated technology, for example, construction businesses or financial services, fintech, drop shippers.” 

Dean echoes this view and believes firms should try and build their capacity rather than relying on hiring externally going forward. 

“I don’t think enough businesses are creating that sort of headspace for capacity, to think about the sort of skills that they might need in three, four or five years, and to start training people and building that capability now.”