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The Benefits of Outsourcing Your Tax Function
As multinational companies expand their operations around the world, new anti-avoidance measures and new laws are being enacted to ensure that tax authorities receive part of the revenue generated in their jurisdictions. As a result, in-house tax departments are facing complex reporting requirements in different jurisdictions, increasing the time they spend on compliance work and preventing them from focusing on more strategic planning that adds value to the business. Taxand USA looks at the solution to this problem, and the latest trend of multinationals outsourcing aspects of their tax function.
Multinationals are increasingly outsourcing tax work, such as compliance and transaction work, to give financial directors more time and energy to support the business. An increasing number of global organisations are choosing India for outsourcing, for reasons such as cost-effective services, increased productivity, shared risks, reduced operating costs, quality of the technically skilled workforce and increased efficiency. Using shared service centers and outsourcing tax accounting and tax compliance functionalities offers the following benefits:
- Increased focus on strategic and high-value activities
- Improved control, accuracy and timing of tax functions
- Diversification of qualified tax and accounting professionals across different jurisdictions.
Some outsourcers are more aggressive than others, seeing this trend as a radical business model that can change their industries. Others see it as a way to modernise their outdated office operations to appear competitive, or a way to downsize their workforce. Some of our creative clients, however, see it as a way to free up more expensive skilled professionals, such as engineers and salespeople, from routine tasks so they can focus on value creation and spending more time with customers. By outsourcing tax compliance, a tax vice-president can better utilise skilled tax professionals to concentrate on more strategic considerations.
Taxand USA discusses this new outsourcing trend in more detail, including the benefits of outsourcing to India
Using a shared service center for select tax and accounting compliance functionalities is becoming a best practice. The savings from lower labour costs can be appealing. But it is the impressive gains in efficiency, quality and productivity that have led companies to use shared service centers for tax. We have seen companies successfully use Indian shared service centers to free up their tax department to focus on strategic planning transactions, driving growth and improving margins. When considering outsourcing to a shared service center in India, focus on the following:
- If your tax department has a high turnaround of staff as a result of long hours work, could outsourcing improve this?
- If your tax department is not focused on supporting the business, driving growth and improving margins, but is swamped with tax accounting and compliance, outsourcing could give your tax department the time and energy it needs to support the business.
- Overhead costs can be reduced by automating and then outsourcing some of the tax and accounting functionalities. Consider getting appropriate tax software and putting an automated system in place to collect the correct data, which can be outsourced to the shared service center for verification and processing.