"What's Wrong with Our Tax Department?" - CEO, Every Company Ever, Inc.

Things are getting messier, and there's no reason to think they'll get easier.

The corporate tax landscape is experiencing a transformation akin to the "boiling frog" analogy: The past several decades have been a series of accelerating changes turning up the heat on the corporate tax world. Regulatory changes such as SOX, CbCR, TCJA, CAMT, and initiatives like the OECD's Pillar 2 are reshaping the environment, demanding more from corporate tax departments than ever before. (So many acronyms!)

If you feel like there isn't enough time today, why would next year be easier?

We already know we will be dealing with Pillar 2, working overtime on the FASB's new rate rec disclosure requirements … and don't forget to leave some time to model out each potential corporate tax change that gets proposed as many elements of the TCJA sunset.

Business decisions impact tax departments too.

Adding to this complexity, our companies are continually making business decisions that impact the tax department (i.e., all business decisions), such as M&A, developing and launching new products, entering new markets, changing capital structures, and conducting debt issuances or stock buybacks.

Let's be honest, any company with a business development team is going to do transactions—they are there to do deals, not just say "no."

Technology investment for me but not for thee.

At the same time, there has been a massive surge in investments in ERP systems and AI. The global ERP market is approximately $183 billion in 2024, aiming to enhance decision-making and operational efficiency. Companies are rapidly ramping up spending on AI from approximately $150 billion in 2024 to $300 billion by 2026. The Big 4 accounting firms have committed over $9 billion to AI and digital transformation initiatives.

Despite this deluge of spending, most tax departments struggle to get a budget for technology investments in the tens of thousands of dollars, much less the hundreds of thousands of dollars their functional peers are probably spending.

Tax is special, but maybe not in a good way.

Why is tax often left behind?

The rules change fast. Really fast.

I was teaching a tax class in the Master of Business Taxation program at the University of Minnesota in the fall of 2017. Each previous semester, I'd make some revisions to the materials but otherwise leave things as is, until the Tax Cuts and Jobs Act (TCJA) was passed. Suddenly, all my course materials became outdated. By the time the winter 2018 class rolled around, I had to rewrite the entire curriculum.

Your finance colleagues are never going to wake up and find out that discounted cash flows are irrelevant to performing financial analysis, and your treasury colleagues are never going to just collectively decide interest rates don't matter, yet that's exactly what can happen in tax. Rules can become irrelevant overnight.

Software solutions take time to build. (NOT really fast)

The speed of potential change in tax rules creates havoc for any business trying to build software to serve that market. The development lifecycle of enterprise software is generally 12 to 36 months. The sales and marketing cycle typically takes a similar amount of time. So software companies aren't going to earn back their investments for several years. In an environment that can change as rapidly as tax, there isn't always an incentive to create solutions for the challenges facing corporate tax departments using traditional software development models.

Tax professionals struggle to make a case

We're great at dealing with complex tax issues but not at explaining how new technology can boost efficiency and ROI. A VP of tax at a Fortune 50 company shared with me a recent conversation she had with her CFO. The big takeaway was that the tax department had not articulated a technology roadmap and ROI that was as compelling as other finance functions.

There are some valid reasons for this, as past tax technology offerings have failed to meet their promise, but with a new wave of technology investments being released, there is reason to be optimistic.

Fix the things you can, so you can deal with the other stuff.

Now is the time for corporate tax professionals to advocate for a fair share of the IT budget. With the trend of increasing complexity, granularity, and disclosure, tax departments must automate and simplify processes wherever they can to adapt to the next wave of changes, and new acronyms, that are surely just beyond the horizon.

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