EMEA TMCclient conference
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Redesigning taxoperating model
The Crystal, London9-10 June 2015
During this session we will explore how a large multinational re-designed their TaxOperating Model as part of a finance/tax transformation initiative during a businesscarve-out.
In particular we will focus on:
• Standardising tax processes;
• Defining roles & responsibilities;
• Managing tax process risks; and
• Using outsourcing of certain tax process steps.
Introduction
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Background & trends
Client introduction
Tax transformation - theory
Tax transformation - practice
Critical success factors & lessons learned
Agenda
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Background &trends
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Key tax trendsImportant trends are knowledge and technology availability, regulatorychanges, globalisation, transparency & risk management
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Driver General trend Tax impact
Cost reduction • Economic changescreated need for costreduction
• Standardisation• Outsourcing partners• Automation of processes
Technology • (Tax related) processesare automated
• Combination of IT and tax expertise• Changing workforce skills
Regulatory andsocial change
• Changing regulations,specifically in EU and TheNetherlands
• Ethics and accountability issues• Tax administration relationships (i.e. horizontal
monitoring in The Netherlands)• Stakeholder focus
Transparency andrisk management
• Increased scrutiny offiscal behaviour
• Rules about taxprocesses
• Transparency about operational targets and degree ofcontrol
• Defined responsibilities and upheld through supervision• Tax risks in a business’ internal processes• New legislation (national and international) for
management, supervisors and financial authorities (e.g.,the AFM, the Netherlands Authority for the FinancialMarkets)
• U.S. requires stricter taxprocesses.
• Korea requires disclosure ofTax Control Framework.
• China requires access tointernal tax risk controlsystems.
• Australia assigned risk ratingsto large enterprises.
• India is having more audit-based controls.
• UK requires a SeniorAccounting Officer.
• The Netherlands implementedHorizontal Monitoring.
• Germany requires standardaudit file for tax e-audit.
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ClientIntroduction, vision& background
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Introduction to Client
Our vision
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• At Client we strive to make the worldhealthier and more sustainablethrough innovation
• Our goal is to improve the lives of3 billion people a year by 2025
• We will be the best place to work forpeople who share our passion
• Together we will deliver superiorvalue for our customers andshareholders
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Finance transformation @ClientA major challenge to reduce our costs and add more value to thebusiness
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2011
Strong finance function
Lack of standardisation
Complex IT /data landscape
2015
New finance operating model
Working in more specialised roles
With centres of excellence (CoEs) and markethubs
Increasingly outsourcing
Process framework APQC level 5/6
RACIs (Responsible/ Accountable/ Consulted/Informed) defined
Move to standard SAP
Overallprogress
Where we aspire to be in 2017
More insights and lessreports
Dramatic reductions in(re-) views
Doing things once in oneplace
Faster, clearer decisionmaking (handshakes)
Working at lower costs
Clearer job roles andcareer paths
Relentless processstandardisation
Standard, consistent data
Integrated IT landscape
Startingpoint
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Finance transformation @Client
Our new operating model built around five pillars
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Business partnering co-piloting the business …
… with FP&A CoEs enabling their decision support
… with A&IC driving compliance, data quality andcorrect financials
… with Group Functions providing expert capabilities
… with FinOps at the center of finance operations
and as interface with external suppliers
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Tax involvement
Tax stakeholders and processes in scope
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Tax involvement
Approach taken to design standard tax processes
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SIPOCS Process FlowsDesign PrinciplesScope
• Confirm process
scope with all
relevant
stakeholders
• Determine roles per
processes i.e.
process owner,
process modeler
• Confirm deliverables
• Understand overall design
principles
• Identify and define tax design
principles
• Define who is the supplier,
customer of the process
• Define the input and output of
the process
• Draft process flows based on
design principles and SIPOCS
(suppliers, inputs, process,
outputs, and customers)
Overview Deliverables:
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TheoryFinance/ taxtransformation
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Tax transformation
Four enablers
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• Process design & tax policies• Process improvement &
optimization e.g. Six Sigma, Lean• Accessibility & awareness• Compliance attestation
• Business partnering• Organization design & governance• Shared services & off-shoring• Outsourcing (advisory)
• Competencies, roles &responsibilities
• Training & development• Incentives, retention & succession
planning• Recruitment
• Data & systems architecture• Systems implementation integration• Application management• Security & control Information
&systems
Policy&
process
Talent&
people
Structure&
organisation
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PracticeHow Client tax departmentfacilitated carve-out
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Tax operating model
Approach taken to facilitate carve-out
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Detailed Tax Process Activities Roll outAlign Process FrameworkScope
• Standalone tax
processes need to be
validated and tailored
for NewCo
• Clarity on tax
processes and RACI
is needed to decide on
outsourcing model
and assure training of
new hires
• Leverage on process
standardization and
realize cost reduction
• Understand which tax processes
need to embedded in NewCo
• Prepare and hold process
workshops
• Collect knowledge
• Hold RACI workshop
• Align and validate
• Handover tax processes, incl.
RACI, controls to NewCo
• Onboarding Tax team NewCo
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Tax operating model
In this case we will focus on VAT/GST
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VAT/Goods and services tax (GST)is embedded within variousfinancial processes
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Policy &process
Information&
systems
Policy&
process
Talent&
people
Structure&
organisation
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Validate tax processes and process steps percountry/tax typeBased on standardized tax processes
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Policy&
process
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Talent &people
Information&
systems
Policy&
process
Talent&
people
Structure&
organisation
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Map full time employees retained organisation
Based on standardized tax processes
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Talent &people
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Structure &organisation
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Information&
systems
Policy&
process
Talent&
people
Structure&
organisation
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Choose sourcing model
Sourcing model based on operating model
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Structure &Organisation
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Benefits & criticalsuccess factors
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Tax involvement
What are the benefits?
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Fully integratedprocesses
Standard ITsolutions
Standard reports/data
More efficient
More insightsand less reports
Dramatic reductions in(re-) views
Doing thingsonce in one place
Faster,clearer decision making
Working atlower costs
Clearer job roles andcareer paths
Standard,consistent data
IntegratedIT landscape
Relentless processstandardization
Realized Benefits Tax Involvement
Business Objectives
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Tax transformation
Critical success factors
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• The finance/ tax and technology organizations must be “joined at the hip”
• Be clear about goals
• Don’t “boil the ocean”
• Visioning is completed at the beginning of the project
• Change management is critical
• It’s about the data
• Run the project like you want to run the function
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