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One Man’s Weakness Is Another Man’s Strength: Let’s Team Up

One Man’s Weakness Is Another Man’s Strength: Let’s Team Up

24 October 2012

By Richard Cornelisse

For a long time, the indirect tax profession has been an individual sport. Due to changes in the tax market and in client needs, the profession has evolved—or is evolving—into more of a team sport. It is simply no longer possible to excel at everything regarding global indirect tax management. What has changed over the years?

Sometimes, the root cause of a defect appears obvious such that no further investigation is needed. Such “one-minute manager’s” decisions might improve the bottom line in the short term, but it can have a negative impact on long-term profitability.

The scientific method

If the mutual aim is to learn and grow together, it can never be about being right or wrong. Rather, one should learn to recognize the problem, measure the magnitude of the problem, determine why the problem exists, and generate a set of solutions to make sure that the problem is resolved. This is the scientific method that we all learned in high school and/or university, where we debated and challenged each other daily.

I studied tax law myself. Based on factual information that we were provided, we had to find and analyze the appropriate tax and case law, take a position and then defend that position. This required the ability to interpret and translate the somewhat “foreign” language that is often used by legislators and judges.

Such scientific thinking could be trained and challenged further by simply changing the factual pattern, thereby allowing one to predict the impact and generate solutions to solve the problem or realize opportunities.

Our profession will become a team sport

The next step is to think of an approach to confirm any or all of these new risks or opportunities in a way that is both efficient and effective at the client’s level. What do I need to know in order to check whether the risk or opportunity exists for a specific client? The endgame is the ability to effectively communicate the solution at both the internal (within one’s own organization) and external levels (clients, tax administration, etc.).

We can learn a lot from other, particularly if we disagree, take a position and keep an open mind. We might have forgotten to practice this scientific “teamwork” method structurally in our day-to-day practice, but I believe the future role of an indirect tax professional must include such an approach to make a difference. Why? Because I believe that our profession will become more of a team sport.

I have positive memories of the “good old times”. My roommate and I took opposite positions and usually left the office long after normal business hours. Back then, our interest was in being truly passionate and having fun. This is how I started around 19 years ago.

“Every single person I know who is successful at what they do is successful because they love doing it” - Joe Penna

How can we avoid one-minute managership?

Nowadays, possessing excellent technical tax skills is essential to differentiate yourself from your competition. In short, you need to excel in order to get hired, and this is something that will be checked during an interview.

Times have also changed. I believe that nowadays you have to grow up at a much earlier age. Didn’t we old(er) guys and gals have more time to talk and socialize? Did we face similar time and budget constraints? Perhaps I simply forgot.

I raised these questions for a reason. My aim is not to move backward, but to move forward. The past is gone and will not come back. I need answers to these questions in order to understand the root causes, and such an analysis might prevent the negative impact of a “one-minute managership” decision. Understanding the past and what has changed is a mandatory step in the process.

Let’s consider an example. In the downturn and not making budget, the one-minute solution is often to downsize or stop recruiting. In the short term, this is the easiest way to improve the bottom line.

It might be the right decision, but only if you know the impact in the long run. If the root cause of not making budget is on a higher level—for example, if the business is run neither effectively nor efficiently (e.g., due to a lack of teamwork or the proper training to deal with new situations)—the long-term result of such a decision might be unprofitability. T

hus, recognizing the problem using the scientific method is the opening chapter, and measuring the problem is the next. A lawyer never assumes anything but should know the facts. Here, we are talking about the same principle. My Blog “The Conflict Between ‘Actual to Budget’ Controls and ‘Budget-based Compensation Targets’ deals with root causes that go beyond indirect tax.

The changing world from an adviser’s perspective

What is different nowadays?

When I started around 19 years ago, indirect tax specialists were scarce, there were hardly any in-house indirect tax functions and content, which nowadays is freely available on the Internet, could still be sold.

“In the land of the blind the one-eyed man is king”

An adviser can work more reactively. A comparison can be made with a doctor who has patients in the waiting room, can diagnose the patients, can find the problem and can then prescribe some pills to remedy the situation.

We had full access to all kinds of VAT planning schemes, and the tax profession—both the buyer as the seller—was much more product-focused. As advisers, we were targeting new patients. That is how I took my first baby steps in the profession, but this is an approach that I now dislike.

When I started, the (starting) salaries were much lower, and that meant lower charge-out rates. Increased salary is one of the reasons why tax professionals now must grow up more quickly. A higher salary means a higher charge-out rate, and from the client’s perspective, a higher bill means higher expectations. We must deliver higher quality and higher practicality; this is just a fact of life.

The changing world from the client perspective

In addition to the introduction of anti-abuse law, clients themselves (and their needs) have also changed. To continue our analogy of the doctor, the patients have become doctors themselves by setting up their own in-house indirect tax functions.

Thanks to tax industry networks, tax knowledge is shared and communicated within the industry. The result is that the service and the ability of an external adviser have had to evolve as well.

Changing client needs have also resulted from factors, including:

  • Globalization
  • The use of technology
  • Scandals such as the global credit crisis and Enron
  • Increased tax authority scrutiny, etc.

Discussions regarding accountability put both the external adviser and the in-house indirect tax function in a more proactive mode.

Back to the ‘one minute managership’ example

Based on the above factors, the key factor is that overall client needs have changed. Going back to my one-minute managership example:

  • Is the business run efficiently and effectively to meet the client’s needs?
  • Was the change foreseen, and has the leadership taken action?
  • How much money was lost due to disconnect or internal competition
  • Has proper training been provided to deal with these new client needs?
  • Is teamwork being stimulated?

The above are just a few root cause analysis questions.

One man’s weakness, is another man’s strength, so let’s team up

Because of these changes, technical tax expertise has become more a basic skill from the adviser’s perspective.

The soft skills of the adviser are—and will become—the key differentiator.

Due to all of the technological developments, this is already part of our present and future. Technical tax advice must be implemented in systems, processes and controls. Instructions must be given to people who are outside of the tax function. Alignment with the business is essential for the tax function to plan in a timely manner and to avoid future firefighting.

In order to challenge and support a client in his mission, an adviser should possess—in addition to excellent technical skills—a clear understanding of communication and collaboration, project management, change management, information technology, negotiation and leadership. All of these skills are needed in order to be successful.

This applies to both the individual adviser and the organization that has the objective of achieving or maintaining market leadership.

The indirect tax profession has been an individual sport for a very long time. The profession is still about the individual’s technical tax strength and personal practical experience, and the supporting staff are often trained by that individual.

Without a doubt, many indirect tax professionals are—and will continue to be—successful. However, it is my opinion that the indirect tax professional of the future will need to take a different approach.

Why? It is simply no longer possible to excel at everything regarding global indirect tax management. Thus, some people can excel in certain areas of indirect tax, and the overall outcome of the team’s effort will make the real difference from a quality standard perspective.

“Break down barriers and improve teamwork up, down, and across organizational lines. A considerable amount of money is lost due to disconnects or competition between groups that should be working for a common cause: providing value to customers” - Jack Welch

In other words:

“One man’s weakness, is another man strength, so let’s team up” - Richard Cornelisse


Take aways 

We combine technical knowledge with industry understanding and knowhow of technologically advanced tools and methodologies available in the market or developed by ourselves.

  • Focus on tax processes that could be improved
    • Manual process: same data requests are made by different stakeholders
  • As Is assessment
  • Anticipate future changes and the data needed
    • What are tax trends?
    • What is happening locally and what should be considered across jurisdictions where you operate?
    • Anticipate new stakeholders and their data needs or requests (internal and external)
  • Define scope and actions for short, mid and long term
  • Write business case for change
  • Realize sponsorship for implementation
  • What tax data is requested and by whom?
  • What tax process can be improved and what can be automated?
    • CIT, VAT, tax data warehouse
  • What is the Return on Investment?
    • Hard saving: process improvement
    • Meeting (new) tax requirement
  • What systems are in use: SAP, Oracle, etc
    • By which entities?
  • How many end-use computing tools (e.g. excel spreadsheet) do we have?
  • How do we avoid an ad-hoc solution?
    • Understand the bigger picture
    • Real problem and not the symptom

Technology-related tax risk: understand and address the potential harms and benefits of (new) technology.

Ascertaining proper IT support for ensuring efficient, timely and reliable reporting.

VAT should be considered in every aspect of the process, from concept through completion and beyond. Managing by design — looking at any process or transaction from end to end and factoring in all the requirements and controls essential to designing and optimizing a compliant VAT process.

We speak the language of the business and IT and no translation is needed.