Much like CFOs, tax leaders have seen their roles shift over the past few years. They’ve come to focus more on strategy and less on day-to-day operations, and they’ve also had to manage a more complex regulatory and business environment.
Ken Kuykendall, US tax leader and tax consulting leader at PwC, spoke with CFO Brew about how CFOs can partner more closely with tax leaders and help them meet the demands of their changing roles.
This interview has been lightly edited for length and clarity.
What are some challenges tax leaders are facing right now?
There’s an incredible amount of uncertainty, if you think about US policy and the direction that’s going, with expiring provisions in the US in 2025, and then you couple that with all the focus that’s already out there around US spending and deficits. At the same time, globally you’ve got the OECD efforts to try and harmonize tax rules that actually may have the opposite effect.
And then you add to that challenges around trying to find talent. Overall, less people are coming into the profession at a point in time when the workload is getting heavier. And on that note, there’s more and more filing obligations that continue to get layered onto organizations right now.
How have you seen the role of the senior tax leader change?
The days of the business doing what they’re doing and the tax function sort of figuring it out on the back end are in the past. The reality is tax needs to be sitting at the table, helping them figure out the strategy up front.
What are some areas where tax leaders can help drive strategy?
In today’s world, almost every organization is looking at digitizing products or solutions, or creating new products and solutions that are digital. All those things have massive tax ramifications to think through, and different ways of structuring them can create different sorts of tax incentives. How do you tax the transfer of digital products or solutions? Where is intellectual property being created?
Companies are also focused on energy transition, climate, sustainability. The number one way that governments are incentivizing these types of behaviors is through tax credits. So it’s gone from tax being an afterthought to, all of a sudden, the tax professional can help shift the underlying strategy around energy transition or where you’re going to build an electric vehicle battery plant.
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Where does the CFO come in?
Many times the senior tax executive reports to the CFO. Trying to help the tax executive be in a position to focus on those strategic areas is critical. And that means helping them think through how to manage the day-to-day to free up the time for the value-creating activities.
How can CFOs support tax leaders or the tax function with the challenges they’re facing?
I think there’s going to be a heavy shift to using service providers to outsource reporting. And a CFO giving a tax executive liberty to do that will be helpful. There are a lot of people that think that success is being able to do that stuff in-house, and that’s not necessarily the case.
And what comes along with that is encouraging the senior tax executive to rethink talent. Maybe you need to put more technology people in your group that can manage data and routine tasks, and save the CPAs and attorneys for the real core tax work on the back end.
And then encourage the senior tax executives to stay as close as they can to what the C-suite’s objectives are. Know what our business objectives are, know where we want to go, understand what our strategy is around changing our products and solutions, understand what our strategy is around sustainability and energy transition.
What should CFOs be aware of when investing in tech for the finance function?
Invest in tech, but invest smartly in tech. What’s the most important thing in tax? It’s clean data. If you can manage data effectively, that opens the door for all sorts of AI tools and automation. But if you don’t have clean data, you end up having a lot of tax people trying to clean up data.