Corporations get ready to max out tax spending

Tax and finance leaders foresee a whole lot of spending on the horizon due to pending legislation and regulation, talent matters, technology and data.

EY’s 2022 Tax and Finance Operations Survey, released on Tuesday, is based on the insight of 1,650 global executives in a dozen industries. About 84% plan to change their tax and finance operating models to prioritize automation, use of shared service centers and co-sourcing. In addition, over the next two years, 95% of companies plan to reallocate some of their tax and finance budget away from usual activities like tax compliance to strategy-focused areas like tax policy. With co-sourcing, a service provider can work alongside tax and finance team staff to help with compliance reporting. Within the next 24 months, 96% of organizations with revenue of $30 billion or above plan to turn to co-sourcing, EY found.

As digital transformation is on the upswing, 85% of companies with $30 billion or more in revenue plan to spend $2 million or more on advanced tax technology over the next three years, according to the report. On average, 70% of respondents said they plan to do the same. But there’s a hurdle to jump in this area. About 95% of the leaders said there’s a skills gap in the tax function. Over the next two years, finance and tax professionals need upskilling when it comes to technology and data processing, the respondents said.

Meanwhile, remote work for many companies is becoming the norm as Omicron upends return to work plans. As a result, more than half of the leaders surveyed said they will face additional tax and reporting obligations in the coming years. Why? A workforce that’s geographically dispersed may add complexity to tax compliance, according to the execs.

New digital tax filing obligations are likely to accelerate expenditures, the report found. Over the next five years, 83% of respondents expect to spend at least $5 million and an average of $11.1 million to meet the challenge. Global tax reforms, including the development of new global minimum tax rules, are also a concern. In October, G20 leaders reached a deal to set a 15% tax on multinationals’ global profits. About 32% of respondents said a barrier to success will be an inability to evaluate and respond to the pending changes.

See you tomorrow.

Sheryl Estrada
sheryl.estrada@fortune.com

Big deal

The 2022 CFO Outlook for Healthcare report released by Syntellis gauges the most pressing issues facing finance leaders in the industry. Finance leaders in healthcare said their top priorities for 2022 are to manage strategic and performance improvement initiatives (52%), reduce costs (48%) and measure and monitor productivity (39%). In regards to new technology, companies are looking for better ways to predict the future. Within the next 12-18 months, almost half (46%) of respondents plan to increase data analysis by using predictive analytics. The report is based on a survey of 420 finance leaders and data from 1,000 hospitals and health systems. 

Courtesy of Syntellis

Going deeper

A new report by McKinsey & Company takes a look at how remote work presents opportunities for communities to revitalize local economies. The firm provides an analysis of Tulsa Remote, a remote-working program in Tulsa, Oklahoma, that is boosting local economic growth, the report finds. "Participants in the program, who must already be working in a job that allows them to work from anywhere, receive $10,000 for relocation to Tulsa, membership to a local coworking space, help connecting to the Tulsa community, and assistance finding housing," according to the report.

Leaderboard

Robert Adams will retire from his position of SVP and CFO at ALLETE (NYSE:ALE), an energy company. Adams will remain at ALLETE until June 2022. The company has initiated steps to identify a new CFO and expects to do so in February. Adams has held a variety of roles in his more-than-35-year career with ALLETE, including VP of finance, chief risk officer and VP of business development and SVP of energy-centric businesses.

David Krisher was named CFO at Krystal Restaurants. Prior to joining Krystal, he served as CFO for Ascent Hospitality Management, the parent organization of Huddle House and Perkins Restaurant & Bakery. During his time as CFO for Ascent, David led the acquisition of Perkins. He also oversaw capital management and liquidity efforts during the COVID-19 crisis, including lease deferrals, renegotiation of credit agreements, and managing other essential financial needs.

Overheard

“We’ve had 80% of the world’s geography that is green field for us. The opportunity to address large parts of that geography is with free-to-play, and that’s where Zynga’s expertise lies.”

—Take-Two CEO Strauss Zelnick on the acquisition of Zynga in a cash and stock deal valued at $12.7 billion, allowing the company to penetrate high growth areas such as India and Africa, as reported by Fortune.