Tax Budget vs.Tax Responsibilities

🚨 The budget of tax teams continues to be under pressure. Whereas, paradoxically enough, the responsibilities and overall exposure of such a team have never been higher. Time to ring the alarm?

It regularly surprises me (and even makes me slightly sad) that I observe how multinationals go from one SG&A right-sizing exercise to the other. Year after year. Inspired by the mantras we all know. “We don’t need to work harder, we need to work smarter”.

“We need to do more with less”. “Let’s focus on operational excellence”. “The company is implementing a cost-conscious culture, as a competitive advantage”. “A penny saved is a penny earned”. And I can go on for a couple of lines like this 😅.

In-house tax people immediately feel the tension this is bringing. Indeed, on the one hand, most companies today are having ESG objectives (with tax components), and they want to evolve to more transparent and responsible tax behavior. They want to have the highest levels of compliance and reduce the overall level of controversy and risk. Oh, and if possible, they want to be tax efficient, and work based on an effective tax operating model.

On the other hand, the cost-saving initiatives are twisting the arm of the in-house tax function. They kind of nudge to cut corners, to be less ambitious, to not go beyond what is legally required. They promote being compliant “stricto sensu” (yes, tax nerds refer to Latin quotes regularly), take a wait-and-see approach, and hide away any proactivity plans.

We tax people now that the role of tax in society is ever-increasing. We also know that the amount of work for tax teams has never been higher. We are aware that all stakeholders are becoming more demanding, not only the tax authorities, the investors, the board, or the statutory auditor, but also the customers and the public in general. Well, it is exactly that feeling that brings me down from time to time. The understanding that when it comes to the budget of the in-house tax team, going for a race to the bottom is a very, very bad idea…

What is your opinion?