Companies need to invest more in their talent and new technology if they are to survive stakeholder demands over tax disclosures
US companies are under pressure to make more tax disclosures, as it becomes part of the environmental, social and governance (ESG) and artificial intelligence (AI) conversation, but a lack of technology and skills are holding many back. This is one of the findings of a survey by KPMG in the US, which polled 500 executives at companies with turnovers of more than US$1 billion.
The study reveals that six out of ten (59 per cent) are already using AI in their tax and finance departments to ease workflows and soothe the strain on workers.
However, only ten per cent of those polled said their organisations were ready to share their total tax contributions – a disclosure many regulators and market observers, including investors – have moved towards as part of a growing drive to see tax join ESG and sustainability disclosures.
It won’t be easy. More than half of those polled (54 per cent) say the difficulty in gathering tax information from global operations is the biggest obstacle to more reporting.
However, a hefty one-third say the issue is the absence of technology needed to collect and process the data.
US companies face a push from the Financial Accounting Standards Board – the US accounting watchdog – to provide more details of their tax contributions.
A consultation document says investors, lenders, creditors and providers of capital seek enhanced tax disclosures to see how worldwide operations manage tax risk. According to KPMG, executives believe pressure is coming from shareholders (51 per cent), employees (47 per cent), the general public (44 per cent), the board (44 per cent) and clients (43 per cent).
Greg Engel, vice chair of tax at KPMG US, says tax transparency is increasingly part of the worldwide ESG agenda, and AI is a key tool in the effort to manage the information.
"With mandatory tax disclosures on the rise, companies must act now to prepare," he says. "Embracing AI tools may be the solution to help companies make sense of their vast amounts of data to avoid the risks of having their tax story potentially told for them."
Executives interviewed by KPMG say that they have plans to invest in AI tools. Almost a third (29 per cent) plan to use AI for tax in the next year; 40 per cent plan to invest US$10 million or more, and another 30 per cent say their organisations will spend US$1 million-US$10 million.
However, there are impediments to using new technology, including a lack of talent. Just over a quarter of those polled (26 per cent) say they don’t have the skills to make sense of their tax data, while 23 per cent say they don’t have the people to collect and collate the data.
Rema Serafi, KPMG’s national managing principal of tax in the US, says the emergence of AI in tax departments makes having the right talent more critical.
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