Today’s tax functions are in the midst of an era of unprecedented change. The Internet is rapidly increasing the pace of globalization, enabling businesses of all sizes to buy and sell across the world, prompting international taxing authorities to implement new regulations that increase the digital tax obligations on businesses. The globalization of business and digitization of tax has created a cosmic collision of tax and technology, which has taken an industry that was already astonishingly complex and compounded the responsibilities placed on tax professionals.
In this new era, digital transformation has made it increasingly difficult to distinguish between an online and traditional business, because most businesses today leverage a range of technology solutions regardless of their industry. All of these changes require a rethinking, not only of the function of the tax professional, but ultimately the enhanced value that tax departments can provide to their organizations.
To keep pace with evolving trends, the tax professional must learn and adapt rapidly. Technology has become a requirement for tax departments who want to stay compliant and on top of the ever-changing tax legislation landscape. Because of the increased reliance on technology, tax professionals now have to operate as multi-departmental employees that work closely with finance, IT, and HR.
Throughout history, and still today, people have assumed that transaction tax is easy because at the surface it’s just a rate, right? They easily forget that these taxes affect everyone in more than 190 countries, and it’s continuously being amplified by the innovation taking place in e-commerce, online marketplaces, mobility, and the domino-like digitization of the global economy.
Yesterday’s tax professional was required to have a skill set that was purely functional and completely tax-focused. But today, tax professionals possess a wide range of skills, operating in a collaborative, forward-looking environment that helps them manage the conveyor belt of new tax legislation globally. The modern tax professional also understands critical nuances of their business, such as how tax obligations can be triggered includes remote employees, customer location, warehoused goods, and trade shows, to name a few.
As if all of this is not enough, the modern tax professional is also incredibly tech-savvy. Tax data today exists within other business systems, so tax teams have been forced to understand other operations in other areas of the business while taking a data-driven approach to analysis and decision-making. They are also tasked with managing compliance at a scale never before experienced across the profession. Thanks to technological innovation, consumers are no longer confined to their borders when it comes to finding the perfect product and businesses have been quick to reap the benefits of our global economy. However, it’s the tax professional who has been left to navigate the perplexing world of cross-border transactions and the associated customs duties, tariffs, and taxes that come along with it.
As we make our way into 2020 and a new decade, we can be certain that tax legislation will continue to evolve alongside the rapid technological innovation that is to come. As businesses continue to grapple with the changes from the South Dakota v. Wayfair Inc. decision almost two years later, they will inevitably have to adapt as changes make their way to the U.S. in the form of digital taxes, e-invoicing, and other tax trends currently sweeping across Europe, Asia, and South America. Managing the compliance obligations that come with each of these changes will be vital to the success of any business hoping to extend their services on a global scale.
For business leaders, the time to recognize and support your tax teams is here and has been here for quite some time. Your tax team is no longer responsible for only understanding the tax codes and rates that apply to your business. They are now required to fully understand what your business sells, how sales are made, what post-sales services are provided, and where the inventory is kept. The value tax professionals have provided to business functions has never been disputed, but it’s time that these individuals are credited for their contributions to overall business success.
For tax professionals, the complexity of your job function has only begun to change. Fortunately, many of you have already embraced the shift toward a globally focused, high-tech tax function, so perhaps the most difficult hurdle is behind you. As we enter the “Year of the Tax Professional,” one thing is certain technology will need to continue to evolve to help manage the added expectations placed upon your teams by new regulations.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Scott McFarlane is the CEO and co-founder of Avalara.