Thomson Reuters (NYSE/TSX: TRI), a global content and technology company, has released new research revealing that corporate, tax and foreign trade departments say they are under-resourced for technology and talent, increasing risks to their businesses.
The Corporate Tax Administration Report 2023 highlights that under-resourced tax and tax administrations are more likely to face audits and penalties. For foreign trade professionals, feeling understaffed is a major challenge, according to the 2023 Global Corporate Trade Survey report.
Departments face extensive documentation requirements for their current import and export business environment – including new requirements to collect environmental, social and governance data to comply with local laws – which increases complexity and reputational risks.
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“Professionals are rediscovering and redefining the way they work, and understanding the value they provide, at the same time that significant transformations bring new requirements. In our latest studies, including the Future of Professionals report, we see excitement among corporate departments regarding productivity and value opportunities, especially in Confronting Automation and Artificial Intelligence. America, Luciano Idicio.
“But there are challenges that can make it difficult to unleash the potential of these professionals. Our research suggests that leaders have limitations in terms of the financial resources needed to adopt technology or in terms of the number of employees to achieve their goals. “All this extra pressure does not limit the success they can achieve,” he adds. “Not only does it expose risks, and increases the possibility and cost of potential sanctions.”
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Pressures on technology resources and talent increase business risks
Half of corporate tax departments (47%) admit they have limited budgets for technology, resources and staffing, especially at companies with revenue between $50 million and $6 billion.
Nearly three-quarters (72%) of companies with under-resourced tax departments had conducted a tax audit in the previous year, compared to 61% for tax departments overall.
Half (47%) also incurred tax penalties, with an average value of US$40,000, twice the average fine of US$20,000 generated by all tax administrations. Technology was rated as the most effective way to reduce risk (17%), ahead of improving quality control and employing more staff.
Likewise, a third of foreign trade professionals (33%) realize that their departments are feeling the pinch of staff and budget shortages.
In addition to resource scarcity, they view disruption as one of their biggest challenges, along with inflation, supply chain issues, international conflicts, and regulatory changes.
Increase efficiency through tax automation
Improving efficiency tops the list of priorities for tax departments (32%), followed by acquiring additional software (14%) and automating processes (12%).
Compared to last year, a quarter (23%) said their team was very proud of automating processes by implementing new technology or software.
In terms of near-term resource priorities over the next year or two, the introduction of automation is in tax departments, with 51% rating this process ahead of increasing efficiency (46%) and headcount (34%).
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Two-thirds of large companies are modernizing business technology
In foreign trade, there is an increasing focus on investing in cloud technology to control all aspects of a company’s supply chain.
Two-thirds (65%) of companies with revenues greater than $100 million are implementing technology updates with priorities focused on:
Supply chain security and data protection (62%, up from 54% in 2022);
Ensuring transaction compliance (55%);
Improving information exchange within and between departments (51%).
Change is a constant for businesses
More than two-thirds (69%) of corporate tax professionals expect their companies to see significant changes in the next two years, particularly in the following areas:
- changes in product and service offerings;
- restructuring or merger;
New jurisdictions, especially in the services, technology, media and telecommunications sectors.
For foreign trade, the coming months should see a greater need for compliance, as new changes and regulations arrive around the world.
Combined with challenges from inflation, shortages and supply chain disruption, half (46%) of foreign trade professionals see retaliatory tariffs as the area most likely to impact trade.
The UK’s new customs declaration service (43%) and China’s export control law (36%) are other key factors that professionals feel could impact corporate firms’ business operations.
