The Tax Function in a time of COVID-19 - Wolters Kluwer CCH

The Tax Function in a time of COVID-19

By Wolters Kluwer Central

Tax professionals are a resilient lot – negotiating complex, ever-changing laws and regulations across multiple jurisdictions and making sense of masses of data. Typically, this is done under tight deadlines and with limited resources.

The current pandemic represents a challenge like no other. To find out how tax functions are managing this new norm, Wolters Kluwer reached out to industry leaders:  

  • Zennia Csikos, Head of Tax Pacific Zone Schneider Electric
  • Peter Dimech, Head of Taxation and Alesha Mercieca, Manager Tax Operations, at Australia Post and
  • Andrew Danckert, Director at corporate tax technology consultancy, Cumulus Tax. 

How have you managed working remotely? What has worked well? What have been the major challenges?

Our Tax Function leaders were all comfortable with working remotely. Their businesses all had flexible working arrangements in place for some time, with reliable and effective infrastructure available to support the move to remote work. For Andrew Danckert, to deliver projects effectively his team must be aligned with how his clients work so it’s essential to “be agile and mobile when it comes to where and how we work.”

People management, rather than technology, is a slightly more complex story. Supervising the well-being of employees when you are not meeting in person can be challenging.

“Staff tend to put on their ‘best face’ when on a call. It is important to have video rather than voice meetings so one can pick up on visual clues on employee wellbeing.”

Zennia Csikos, Head of Tax Pacific Zone Schneider Electric.

Alesha Mercieca has managed the demands on the people within her team by trying to limit meetings and schedule calls, giving people space and time to prepare, especially those with children at home. She notes that people are now working different hours – some are online very early, others late at night – however, “as a leader you need to ensure you’re not working all hours”.

“It is important to respect the line between work and private hours, especially when under deadlines,” says Zennia. Helping team members to balance flexible working hours when at home with the need to take time to switch off from work demands has been one of her keys to success.  

The opportunity for informal interaction with key business partners and the information that comes from day-to-day conversations is also missed. Alesha notes there is no longer an opportunity to action questions as quickly as when you shared the same floor space. Not surprisingly for our consultant, Andrew, the inability to get out into the market and meet with referrals has at times been a challenge. He uses several visual communication tools to share ideas and his clients really appreciate the weekly progress calls where he can share screens and run through what has been achieved.

‘Whilst video conferencing is great it doesn’t always replace a face-to-face meeting or a team brainstorming session in front of a whiteboard.’

Andrew Danckert, Director, Cumulus Tax. 

Overall, the move to remote working has worked well within the two Tax Functions. Alesha believes that for her team productivity is unchanged – “everyone’s getting involved and working together to get things done.”

What are the major tax implications for your business and its clients in the current crisis?

Zennia recognises the need for awareness of business cashflow for not only your business but that of your suppliers and customers as one of the impacts of the current crisis. Raising awareness of government incentives to suppliers and customers has been important to ensure that supply chains can continue to operate. The administration of employee support subsidies – ensuring that payroll systems are correct and that good governance is being maintained – were also viewed as critical.

Peter advised that it is important to pay attention to the possible implications for Fringe Benefits Tax, for example where staff have not used company motor vehicles as much as would have been expected.

All noted the high volume of changes to tax law and policy due to COVID-19, many being made on the run with little explanatory material provided, which increases the effort required to not only keep up but also to deploy the changes effectively.

Very early on, Peter recognised the importance of monitoring the significant impact of the COVID-19 stimulus packages. Peter assigned members of the team to monitor every stimulus announcement – Federal and State – to assess the impact these may have on the thousands of small business owners and contractors that work with Australia Post.

Zennia remains watchful of the impact of global shutdowns on supply chains. Customers are also not operating at full capacity due to restrictions.

Interestingly, Australia Post had planned for its post offices and contractors to struggle but the reality was that they were very busy in April. In fact, Australian Post has opened pop-up depots to support the workload of their operation centres challenged by social distancing requirements.

This means that the Australia Post business may have different revenue and cost make-ups compared to the previous year, which will lead to more conversations than normal with other parts of the finance function and ongoing conversations with the ATO. Andrew has observed that, for all tax obligations work, the capture, transformation, reconciliation and storage of data from the business, which were hard and time consuming before COVID-19, are now even more difficult in the current environment.

What should Tax Functions and the businesses they support be doing now to prepare for emerging from the crisis?

Zennia believes that the Tax Function will need to be even more across business forecasts to help determine how the business will emerge. Tax managers will have to evaluate whether there are any incentives that can be utilised by the business and test the assumptions made when applying for those incentives.

The Tax Function will also need to understand what information needs to be captured now for reporting down the track including forecasts, supply chain (especially for related party transactions) and new employee benefits that may be subject to FBT. Andrew sees a return to the new normal as an opportunity to start the journey to unified tax information. He believes that the Tax Function needs to be more involved in data warehouse discussions and implementing ways to better engage with its stakeholders.

How do you envisage the Tax Function returning to BAU? Has the crisis changed how the Tax Function will look and operate in the future?

Peter believes that while Australia Posts’ operations have continued to run as normally as they could within the confines of social distancing, the return to large corporate offices will be a long-term process. Some of the team may even choose to delay their return to the office.

He expects that in the future more people will work from home on a regular basis or increase their at home days, perhaps moving from one day a week at home to two or more. All agree that the crisis has confirmed that working from home does not impact upon productivity.

That said, far from being ‘siloed’, Peter expects that the Tax Function will have even more interaction with other areas of the business in the future, such as property and procurement – who are looking 4-5 years out and need advice from Tax now.

Zennia believes that Tax Functions must always be dynamic and cannot approach the future with a ‘BAU’ mindset. The current crisis will help to identify the strengths needed to operate in a dynamic environment and this will help tax leaders to define the team that they will need for the future. Whilst each organisation will be different, Andrew is expecting technology to play a much greater role in achieving Tax Function outcomes. The Tax Function has always looked to technology options to become more efficient – this is not something driven by the crisis.  However, as before the crisis, the Tax Function will continue to be challenged to contain costs in the future. Andrew notes that it is vital that businesses understand and analyse the cost of meeting each obligation. The obvious costs such as ‘hours x cost per hour’ should be easy to ascertain but more thought is needed to quantify hidden costs like reputation risk, business distraction, staff turnover and on-boarding new employees during the crisis.

While tax technology is important it must compete with other areas of the business for investment, especially operational teams. However, as Alesha notes, spending on activities that are perceived as core to compliance are prioritised and attract mandatory spend.

With this in mind, Andrew suggests Tax Functions should take a holistic approach to data management where the capture, transformation, reconciliation and storage information of information is streamlined and centralised.  He often sees an imbalanced ‘return on investment’ relationship where these activities are done by people and it is generally highly skilled tax professionals doing these tasks. 

“Anecdotally I’ve heard that between 60% to 70% of a tax reporting process can be spent on activities linked to data management. We now have ETL technology that is powerful, intuitive, and affordable that boosts productivity, reduces risk and enables the ‘highest and best use’ of a tax professional’s time”

Andrew Danckert, Director, Cumulus Tax

Andrew expects to see greater use of BI tools with tax engines like CCH Integrator to help inform stakeholders of tax expense, tax liability and tax risk.