Under-resourcing in global tax and trade increases risk for multi-nationals, garners new Thomson Reuters research

Half of corporate tax departments globally say they are under-resourced for technology, resources and hiring (47%).

Under-resourced tax departments are more likely to incur tax audits and penalties

Two-thirds of companies with $100 million-plus revenue are implementing technology to help manage their global trade operations (65%)

Thomson Reuters (NYSE/TSX: TRI), a global content and technology company, today released new research that reveals both corporate tax and global trade departments state they are under-resourced for technology and talent, increasing risk for their businesses. Published today, the 2023 State of Corporate Tax Department report highlights under-resourced tax departments are more likely to face audits and penalties. For trade professionals, feeling understaffed is an acute challenge, shows the 2023 Corporate Global Trade Survey report. Departments are facing the data-intensive demands of today's import and export trading environment - including new requirements to collect ESG data to comply with local laws - adding complexity, and reputational risk.

'What we're hearing from tax and trade leaders in these latest reports echoes what we heard in our Future of Professionals research: tax teams are under-resourced and the need for internal efficiency is their top priority. There's significant optimism about the potential of automation and generative AI to boost efficiency and support future growth,' says Ray Grove, Head of Product, Transactional Compliance at Thomson Reuters. 'But tax and trade professionals are facing barriers to unlocking this potential, and, specifically, they're feeling under-resourced in terms of technology budget for their departments, as well as headcount to be able to achieve their goals. This is not only tempering the success they can have - it's also bringing risk and increasing the likelihood, and cost, of penalties that they're facing.'

Tech and talent resourcing strains is increasing business risk

Half of corporate tax departments (47%) admit they are under-resourced for technology, resources and hiring, particularly in firms with revenue of $50 million to $6 billion. Almost three-quarters (72%) of businesses with under-resourced tax departments incurred a tax audit in the previous year, compared to 61% of overall tax departments. Half (47%) also incurred tax penalties, with an average value of $40,000 - double the median penalty of $20,000 incurred by all tax departments. Technology is ranked as the most effective way to reduce risk (17%), ahead of improved quality control and hiring more headcount.

Similarly, one-third (33%) of global trade professionals feel that their departments are feeling the pinch from understaffing and lack of budget. In addition to lack of resources, they identify one of their biggest challenges as increased disruption, notably from inflation, supply chain, international conflicts, and regulatory changes.

Boosting efficiency with tax automation

Improving efficiency is top of the list of priorities for tax departments (32%), followed by acquiring additional software (14%) and automation of processes (12%). Reflecting on the past year, one-quarter (23%) said their team was most proud of its automation of processes through the implementation of new technology or software.

Short-term resourcing priorities for the next one to two years see introducing automation favored as the highest priority for tax departments, with 51% ranking this ahead of increasing efficiency (46%) and growing headcount (34%).

Two-thirds of large companies upgrading trade technology

In global trade, there is a heightened focus on investment in cloud-based technology to help gain control over every aspect of the supply chain for businesses. Two-thirds (65%) of companies with $100 million-plus revenue are implementing technology upgrades with top priorities focused on:

Supply chain security and data protection (62%, up from 54% in 2022)

Ensuring compliance for transactions (55%)

Improving information sharing, both within and across departments (51%)

Change is a constant for businesses

More than two-thirds (69%) of corporate tax professionals said they expect their companies to undergo significant change within the next two years, with change anticipated around:

Shifting product and service offerings

Restructuring or merger

New jurisdictions, particularly in the services and the technology, media and telecoms industries

For global trade, the months ahead are set to bring greater need for compliance, with shifting and new regulations coming in across the world. Alongside challenges brought by inflation and supply chain shortages and disruption, half (46%) of trade professionals see retaliatory tariffs being the area most likely to impact trade. The UK's new Custom Declarations Service (43%) and China's Export Control Law (36%) are the other key factors that professionals feel may impact trade operations for corporate businesses.

Thomson Reuters

??Thomson Reuters (NYSE/TSX: TRI) ('TR') informs the way forward by bringing together the trusted content and technology that people and organizations need to make the right decisions. The company serves professionals across legal, tax, accounting, compliance, government, and media. Its products combine highly specialized software and insights to empower professionals with the data, intelligence, and solutions needed to make informed decisions, and to help institutions in their pursuit of justice, truth, and transparency. Reuters, part of Thomson Reuters, is a world-leading provider of trusted journalism and news. For more information, visit tr.com.

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Notes to editors:

The 2023 State of Corporate Tax Department

Methodology: Surveys of 365 senior tax professionals across Services, Energy & Natural Resources, Finance & Insurance, Pharma, Bio & Health Technology/Media/Telecoms, General Industries (i.e., Automotive, Manufacturing, Construction, Transport/Logistics/Distribution, Other Sectors (i.e., Government/Public Sector, Not-for-profit, Retail/Wholesale, Conglomerates)

The 2023 Corporate Global Trade Survey Report

Methodology: Surveys of 177 global trade professionals from North America (U.S., Canada, Mexico), EU, UK, and Latin America, primarily upper-level executives, directors, and managers involved in various aspects of global trade, including operations, logistics, procurement, supply-chain management, and compliance. Respondents primarily from companies with more than $100 million in annual sales revenue.

Future of Professionals Report

Methodology: Survey of more than 1,200 professionals from the legal, tax and accounting, and risk professions employed by corporations, firms, and government agencies. About half of the participants were based in the U.S, with most of the remaining half from the UK, Canada, and Latin America. Most of the respondents were in traditional roles, meaning that those in the legal industry were lawyers, those in the tax and accounting industry were accountants and CPAs, and a small minority performed roles in operations and technology.

(C) 2023 Electronic News Publishing, source ENP Newswire