The appetite for change has certainly increased across the tax industry. While it’s a sector renowned for being change averse, there’s now a growing awareness of the need for better processes enabled by technology; a change in stance that, while triggered by regulatory initiatives such as Making Tax Digital, has been sustained and even accelerated by the pandemic.

The COVID-19 crisis has made us all much more aware of how valuable technology is in allowing us to collaborate with our colleagues, give us access to data and in enabling us to get on with our jobs. It has minimised the disruption and ensured business continuity, enabling many of us to work from home (WFH).

The rate of change

It should come as no real surprise, then, that a recent McKinsey survey, conducted in July 2020, found such organisational changes were implemented in record time. For WFH, changes that would be expected to take 454 days took place in just 10.5 days, showing an acceleration rate of 43, while 93% of organisations reported an increase in remote working/collaboration.

The same McKinsey survey also found that digital interactions have accelerated to such an extent that we’re seeing three years’ worth of growth within just one year. And there’s a sense of optimism that these changes will stick, with over half saying they anticipate remote working, cloud-based processes and the use of advanced technologies are here to stay.

Adoption plans

We’re seeing similar attitudes towards digitalisation within the tax industry. In a poll of the audience conducted during the recent ICAEW webinar, ‘How COVID-19 and digitalisation have changed tax forever’ in November 2020, 77% of participants said the COVID-19 crisis had accelerated their plans and that they intended to adopt tax technology within the next three years. Of these, 57% intend to deploy such technology within the next 12 months.

But while tax teams may be more receptive to change, they recognise that barriers remain. Of those questioned, 22.5% cited concerns over having the resource necessary to manage the transition, while the same number said they were likely to still encounter some resistance to change when replacing manual processes with digital ones.

A further concern was legacy infrastructure, with 15% saying that outdated ERP or accounting systems would make it difficult to digitalise the tax process. Interestingly, only 10% thought budgetary constraints would be an issue, suggesting that mandation has now made businesses more open to the idea of investing in the tax function. Almost a third (30%) thought all these issues were likely to impede progress.

Building the business case

To maintain the momentum and ensure future digitalisation, tax teams will need to counter these arguments by putting forward a strong business case. They’ll need to prove that digitalisation helps protect what is now a business-critical function by:

  • Increasing the transparency and accuracy of reporting
  • Allowing fraudulent transaction chains to be identified quicker
  • Enabling the right amount of tax to be declared first time
  • Providing validation at the point of submission
  • Decreasing processing time (thereby seeing quicker repayment)
  • Ensuring access to other services e.g. the tax account
  • Reducing the time spent on preparation
  • Mitigating the risk of error and need for human intervention
  • Improving the quality of the audit trail

If you’d like to find out more about the impact of the pandemic on digitalisation you can see a recording of the ICAEW webinar below, ‘How COVID-19 and digitalisation have changed tax forever’. Or, to discuss how your plans for the digitalisation of your tax function, please contact us at enquiries@taxsystems.com or call us on 01784 777 700.

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