Balancing “tax efficiency” with “tax compliance”

Tax managers need to juggle a lot of work 🤹 . It is a constant balancing exercise. While walking that fragile line, one particular equilibrium stands out. It is the one about “being tax compliant” vs “being tax efficient”. Or in similar words, balancing “value protection” with “value creation”.

Most traditionally, protecting value is related to tax compliance. Whatever a multinational does, it always impacts in one way or another the different returns across the respective tax domains (think about indirect tax, corporate income tax, TP, …). The reporting in the different returns needs to happen in a compliant fashion. If not, adverse consequences will be faced, like penalties or reputational damage.

Value creation most often is linked to business support, or the strategic side of our tax job, like group rationalization projects, the implementation of new business and TP models, or post-acquisition structuring and integration work. Typically, there are different options which are realistically available, and the one driving most business value and the desired levels of compliance, will be implemented.

But what if compliance in itself could become a value driver? I know that very often it is still seen as boring, putting numbers in boxes, a necessary evil. But proactive tax leaders do get that compliance activities can unlock a lot of benefits for the business, including the following:

– Compliance data is gold. Only if you have it at your fingertips in a structured fashion, you can become a data-driven tax department;
If you are data-driven, you will make more informed decisions. You can reduce risks and unlock efficiencies;

– Only data-driven tax teams can be strategic business partners. In the end, as a tax team, we want to support topline growth and the overall success of our company;

– Don’t forget, tax is in one way or another your license to operate as a multinational in the different local countries. If you are non-compliant, your company will lose such license;

– Finding data patterns across the different tax verticals is the next level. This is only possible if you can smoothly track and capture the crucial compliance data and docs per domain. Be mindful that the tax authorities are already doing consistency checks in that sense.

Perhaps it's time we view tax compliance not only as a regulatory burden, but as a catalyst for operational resilience and strategic growth.