Unpacking the 2021 BDO Tax Outlook Survey

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Now, let’s Talk Tax.

In this issue, I will explore some of the key findings from the just-released 2021 BDO Tax Outlook Survey which polled 150 senior tax executives at companies with revenues ranging from $100 million to $3 billion. The survey’s key themes include tax executives’ top tax strategies for this year, their outlook for total tax liability, federal tax policy changes they expect, and more. Explore the survey highlights or get the full report for a deep dive into all these themes or read on for a peak at the total tax liability and tax technology-related findings.

More interested in tax executives’ top strategies for increasing resilience this year? Read my interview with Accounting Today.

Want intel on tax executives’ predictions for federal tax reform? My colleague, Todd Simmens, Technical Practice Leader, Tax Policy and Legislation at BDO, recently sat down with Yahoo! Finance for a discussion on how COVID-19 is impacting taxes - view here!

Outlook for Total Tax Liability

Total tax liability—an understanding of and visibility into the sum of all the taxes a business owes at any given point in time—has become a household term for businesses over the past few years, and it’s clear executives are prioritizing it in their approach to tax planning. Understanding the concept of total tax liability is just half of the equation, however; the true value to businesses comes in reducing their total tax liability as much as possible.

This year, tax executives expect their total tax liabilities will increase—and they have good grounds to feel this way. According to our survey data, tax disputes are rising. Additionally, countries, municipalities and other jurisdictions worldwide are contending with diminished tax revenues in 2021 due to the impacts of the pandemic and will likely try to recoup those losses. This may mean increasing certain rates they have control over or instituting new ones to raise funds. And with a new U.S. presidential administration that holds both chambers of Congress, there are likely to be additional changes to federal tax policy, including paring back some of the 2017 Tax Cuts and Jobs Act.

On top of all this, there is a growing international push to institute an international taxation framework around digital transactions, which could gain ground and even start seeing adoption this year. The bottom line is that tax authorities domestically and abroad are stepping up enforcement, and the result for companies is increased total tax liability. Businesses should start planning now for how they will respond to future tax policy changes, so that when changes do take effect, they’re able to respond quickly to mitigate any impact on their total tax liability. 

Outlook for Tax Technology

Over the past year, tax departments have had to rely heavily on technology to manage the requirements of remote work and many will continue to do so going forward. In addition to enabling remote work, having the right technology is critical for tax departments to manage the impacts of new federal legislation, changing state sales tax rates and international tax shifts.

The pandemic proved to be a wakeup call for tax departments regarding technology. More than half of tax executives (56%) say that technology and process limitations had a major impact on their ability to keep pace with tax changes, and nearly the same percentage say the pandemic accelerated digital transformation within their departments.

Going forward, technology will only grow more important for effectively managing the impact of changing tax rules and regulations by providing line of sight into how such changes impact total tax liability.

This year, tax executives plan to continue investing in transforming their own technologies and processes to improve agility and resilience. Although tax departments often work with outside vendors to set up these types of projects, our survey found that they most often are looking to run them using internal resources. 

After the events of the last few years, it’s clear the only constant in the tax world is change. To succeed in this paradigm, tax executives must be able to measure the impacts of tax changes and develop strategies for mitigating the impact to their total tax liability quickly and efficiently. But with the right tools in place, tax departments will be well positioned to meet what’s next, head on. 

Want the full survey findings? Get your copy of the 2021 BDO Tax Outlook Survey here.