Outsourcing tax responsibilities
Outsourcing remains a valuable option for the tax department when considering its global responsibilities. Outsourcing is often used strategically to free up in-house resources for other activities
and to access best practices and investments in people, processes and technology that cannot be developed in-house.
The number of respondents that outsource or co-source tax department activities has dropped significantly, from 52 percent in 2009 to 34 percent in 2012. At the same time, use of shared service centers rose from 22 percent to 30 percent. These results are surprising, given our experience that demand for outsourced tax services is still strong. Nevertheless, the results suggest that many companies are responding to pressure to reduce costs by outsourcing less.
Indeed, the one-third of companies that do outsource say that they have significantly increased the scope of work done by third parties since 2009. Corporate income tax compliance (which rose from 45 percent in 2009 to 69 percent in 2012) and tax controversy support (which rose from 38 percent to 66 percent) are the most commonly outsourced/co-sourced tax activities. Tax planning and business support (which rose from 34 percent to 58 percent) are not far behind.
Outsourcing/co-sourcing of work in all categories climbed between 20 and 30 percent. This suggests that these tax directors are becoming more comfortable with outsourcing and they are now better at identifying how and when outsourcing/co-sourcing can help optimize their tax operations. In the future, the majority of these respondents say the amount of work outsourced/co-sourced will remain about the same.
When deciding what tax department activities to outsource
or co-source, respondents rank improved management of
and visibility over compliance activities and access to technology as the most important factors to consider, alongside the
expected lack of internal resources. When deciding what activities to keep in-house, knowledge retention and the proprietary or business-critical nature of the work are at the top of the list
While outsourcing still serves its traditional role as a substitute for unavailable in-house resources, our experience is that many leading companies now consider a global or regional approach to outsourcing of compliance activities (including both tax and statutory accounting responsibilities) as a key strategic lever,
as case study #4 shows.