What's on the Horizon for Tax Professionals?

President at Bloomberg Tax Lisa Fitzpatrick shares how tax professionals can prepare for the future, from talent to regulatory pressure.

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The cadence of technological and regulatory change have cause tremendous upheaval and uncertainty for tax professionals. FEI Daily speaks with Lisa Fitzpatrick, the President of Bloomberg Tax, on these issues and what financial executives and their tax teams need to now to navigate the change.

FEI Daily: Sixty three percent of professionals felt that their organization is more exposed to tax-related risks than five years ago. What are some of the factors driving this shift, and what are some of the ways that organizations can best mitigate tax-related risks?

Lisa Fitzpatrick: A key factor in the shift is all the changes that have come from the Tax Cuts and Jobs Act (TCJA), which went into effect in 2018. TCJA has caused significant change on the federal level, and that ultimately ripples to the state-level – with some states deciding whether to conform to the changes. There’s still a lot of uncertainty on the state level.

Then there’s the digital economy, which has seen considerable change with the Wayfair case impacting states taxes in terms of the collection and payment of sales tax. Internationally, BEPS (Base Erosion and Profit Sharing) has brought about significant change and uncertainty for the digital economy as well. 

There’s a lot of change across all jurisdictions, and that’s very challenging for tax professionals because they must understand the changes in the laws and regulations and the how those changes impact business activities and the decision to move in or out of other jurisdictions. That is a lot to navigate. Amid these challenges, there is an opportunity for tax professionals to play a more strategic role in helping businesses seize opportunities and mitigate risk. 

FEI Daily: Ninety three percent of the tax professionals surveyed anticipated regulatory pressure for increased transparency will increase. How will the increase in regulatory pressure going to impact tax departments? 

Fitzpatrick: It’s like putting a microscope on the numbers for the tax department. This means increased exposure and risk – if they don’t get the numbers right or if they haven’t done their preparation in tracking developments. 

At Bloomberg Tax, we track all of these developments across the federal, state, and international jurisdictions. There have been thousands of developments and events that have occurred in the past 12 months. That is a lot to stay on top of, and then you have to understand those developments and how they impact your calculations.

With this call for greater reporting and greater transparency, there is greater need for tax departments to ensure that they’re getting correct data from the organization’s various business lines. Getting the right data in the right format, so they can plug the numbers and make accurate calculations, is a real challenge for tax practitioners.      

FEI Daily: In the tax profession there can be a ‘same as last year’ (SALY) sentiment when it comes to tax compliance and preparation. How can tax departments adopt a culture that more readily embraces change and progress? 

Fitzpatrick: Being surrounded by all of this change calls on tax departments to be open to change and trying new approaches. Adopting new technologies and processes is a necessity these days. There are ways in which technology can make your tax department smarter, and it can also free up time so that you can devote more attention to strategic planning. Tools like modeling provide enhanced foresight into truly understanding the impact of tax changes on your department. With this, tax leaders also need to offer professional development, so their staff is continually raising their skillset. 

FEI Daily: How are emerging technologies like machine learning, robotics, or even artificial intelligence going to impact tax departments? 

Fitzpatrick: When applied correctly, these technologies represent opportunities to drive efficiencies. In the survey, we found that applying robotic processes to repetitive tasks can free up time, make existing processes significantly more efficient, and ultimately provide opportunities to shift their focus to strategic planning. 

FEI Daily: We see a gap in the perceptions surrounding the role that the tax function should play within an organization and the role that it actually plays. How can the tax function become a truer business partner, especially as it relates to high-value added activities like major transaction support, company-wide risk management, and organizational decision making? 

Fitzpatrick: The key is the tax department’s level of engagement with business lines. They need to make sure that their interaction is consistent and frequent, so they know what the different business lines are considering—whether it’s changing business activities or changing jurisdictions. This enables tax professionals to more actively participate in the dialogue and advise business leaders on key considerations. 

Ultimately, tax has a huge impact on the bottom line of any business. So, tax leadership needs to ensure that their teams are actively engaging with businesses within their organization. Then they must ensure that they’re communicating more about what the business leaders need to consider when doing strategic or operational planning. I truly believe that when tax professionals are doing this on a regular basis, that the rest of the business – including the C-suite and shareholders – will see greater value coming from tax. They’ll understand the critical role that tax plays in the success of the business. 

FEI Daily: More than half of professionals surveyed indicated that they saw a growing scarcity of tax talent. What do tax departments need to do to best position themselves to win this war for talent?

Fitzpatrick: Tax and accounting departments need to position themselves to prospective employees as an engaging place to work. This involves breaking the SALY mentality, so that interview candidates understand that there’s opportunity for professional development, as well as a career track within the tax department. 

Then there has to be a focus around promoting more diversity in the tax department. We know from our organization and others that the more diversity one can bring into one’s team or business, the greater the thought leadership, engagement, and – ultimately – success. 

FEI Daily: Looking forward, what are the biggest things that tax professionals need to monitor on the horizon? 

Fitzpatrick: Tax professionals need to stay on top of tax developments. They need those practical insights on what emerging developments mean for your organization. Different tax authorities are responding differently as to how they can generate more revenues, right? Across federal, state, and international jurisdictions, they’re competing for more tax revenues and this is certainly impacting the frequency of the change. 

In addition to that, they need to understand country-by-country reporting requirements, which represent significant, added pressures in terms of reporting and compliance. 

Tax professionals also need to devote time and attention to succession planning – whether it be for their role or for the roles of other folks on their team. They need to ensure that they’re grooming other professionals on their team to be a backup or a future leader in different areas, whether it be planning, compliance, or audit.