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Comments from the Tax 2.0 Executive Forum in New York City today.

Tax 2.0 is about changing tax from a reactive, compliance-oriented world to one that is proactive, strategic and solutions-focused when it comes to the way we work. This will not happen overnight but if we work together and share our success and challenges we will be able to build a tax world that spends more time in front of the data contributing more to tax savings, as well as building environments that are more appreciated and valued. With the economic pain we are experiencing it’s more important than ever for tax departments to take the lead. 

We have 18 tax leaders talking about change and the need for tax people to think differently, speak differently, hire differently, and plan differently.  This could not come at a better time with the pressures we all face from the economy and its impact on corporate performance and the increased pressure we all face.

Let’s bond together to build a better tax community!  

Learn more about the event that is reshaping the future of tax.

The Tax 2.0 Executive Forum 2009 is a highly collaborative one-day event where senior-level corporate tax executives come together for an inspired day of networking, small group sessions, and the exchange of ideas and innovations on the critical issues affecting the corporate tax industry.

Explore the Tax 2.0 Agenda and other resources here.

I received some great feedback at our annual customer conference on the Tax 2.0 site, but one prevailing question kept coming up, “Jeff, why a blog? I like articles and research papers, but I’m not a writer, I’m not going to write pages of insight about a post or an article.”

You know what; I’m not really a writer either. And that’s the beauty of blogging. You don’t have to be a “writer.” To me, blogging is a conversation. It’s not meant to be formal or structured. Think of the countless number of e-mails you shoot out in a given day. If one long chain of e-mails was posted to a Web site (which I’m not recommending) that could be considered a blog. Just like any other dialogue, one person starts a thought and more people join in on the discussion. It really is just that simple.

Despite only being up for the past two weeks, there is already a wealth of information on this site about the issues affecting corporate tax and its direction for the future. From the interactive map you see floating 700 pixels above this post to research and articles authored by the prevailing forward thinkers of tax today, there is currently plenty worth talking about on Tax 2.0.

However, if there are more topics worth talking about, I want to know more. Future of taxation — I’ll talk about it. The current financial crisis and how tax departments can help — I’ll talk about it. Ways to help an overworked tax department have a little fun – I’ll share my ideas, good or bad, and listen to yours. The benefits of RSS over e-mail subscriptions…OK, that one I might ask for an assist from one of my Web folks, but we will blog about it. And while we want this site to be about tax, it’s OK if a conversation strays off topic; that’s what conversations do sometimes. The important thing is to have the conversation, and keep it going until we come away with a few worthwhile ideas.

That was two minutes of conversation, typed. Maybe I am a blogger. Maybe you are too.

There is no doubt in my mind that the current state of corporate tax operations is UNACCEPTABLE and has been for some time.

In defining Tax 2.0, it would first be helpful to step back and define Tax 1.0 (and even Tax .5) to see where we have evolved from.  Tax 1.0 could be viewed as the post-Sox, post-FIN 48 corporate tax department or the current state. Tax .5 would naturally be pre-Sox, pre FIN-48.

Tax 1.0 was (actually, is) a world where 600 plus companies had material weaknesses around their income tax controls at the start of SOX 404 reviews. As a 25+ year tax guy, I can tell you that before SOX, the last time tax professionals dealt with internal controls was for the CPA exam! They simply were a complete non-issue in the everyday operations of corporate tax departments. And while tax accounting was a necessary part of the job, few if any of us got into this business to master accounting for income taxes.

With the flick of the SOX switch our world was overturned: from focusing on tax planning, to focusing on tax risk management, tax processes controls, tax accounting and more tax accounting.

The post-SOX Tax 1.0 world was all about material weaknesses and restatements as a result of improper accounting for income taxes. You can well imagine the outcome of such blasphemy: microscopic visibility into all things tax by the Controller, the CFO, the Audit Committee and external auditors. Tax 1.0 is a state where the tax closing process is completely independent of the accounting close process. It just doesn’t make sense. It’s is a world that demands transparency (the SEC, the IRS, the Big 4 and investors). It’s a state full of manual spreadsheet based processes, completely unacceptable data management practices, the emergence of departmental so-called “automated” provisioning tools and the insanity of FIN 48 accounting. And based on the latest stats, while SOX 404 material weaknesses have greatly decreased, tax continues to lead the list of reasons for such weaknesses for the third year in a row. To be blunt Tax 1.0 sounds pretty ugly.

Tax .5 on the other hand was a fine example of “ignorance is bliss”. It was before SOX and before FIN 48 when tax departments were expected to and were able to spend most of their time on tax planning to reduce the effective tax rate and minimize cash taxes. That game is over!

So now we must ask the question, how do we evolve to Tax 2.0?  How do we now pull the pendulum back to the center where adequate tax internal controls are in place and in a steady state? How do we ensure our staffs are trained-up so we can return to helping our companies maximize shareholder value through sound tax planning and prudent tax risk management?

All I can say is that we better do it soon before the next onslaught - IFRS!!

Management level talent is becoming more scarce, making recruiting and retaining employees more important than ever. BusinessWeek outlines the current situation and provides solutions for managing the labor crisis.

http://www.businessweek.com/managing/content/sep2008/ca20080919_403840.htm

The Rules Are Simpler, But Are Global Accounting Standards Better?

BusinessWeek – While necessary for a global marketplace, the simpler set of standards will have its pitfalls for U.S. companies.

http://www.businessweek.com/magazine/content/08_37/b4099035440167.htm

Financial Times - In an effort to bring more international financial reporting standards education to the classroom, Deloitte has developed the IFRS University Consortium to provide course materials designed to provide both teachers and students with a better understanding of IFRS.

http://www.ft.com/cms/s/2/e74f3b92-9c66-11dd-a42e-000077b07658.html

Tax 2.0 asks Michael Davis, Vice President, Nestle to provide his thoughts on how performance enhancements in the tax department can add strategic value to the business.

Do you expect the impact of compliance to increase over the next five years?
There is no doubt about it – it will increase! The government is asking better questions and using technology more effectively. This will require tax groups to raise their game.

How does your department address the issue of growing compliance?
It’s kind of like a four-legged stool, with the different legs being leadership, tax talent, technology, and immediate access to information. If you don’t have all of the legs working together, it will fall down.

How is the burden of compliance impacting the talent shortage?
Recruiting and retaining the right talent is one of the biggest challenges for any tax leader. Tax professionals are seeking an environment where they have the proper tools, access to tax and financial data, and the relationships necessary to meet their responsibilities in the most efficient way. The ultimate goal for these professionals is to get more involved in planning and audit controversy. That’s where tax professionals can make the greatest contribution.

What kind of talent are you looking to attract?
Most people are, at best, tax “renovators” and focus on reducing the amount of time to complete processes, when what we really need is to innovate and engage in strategic planning. At Nestle, we have a world-class talent machine that thrives in a performance culture. You need to grow and challenge your people. I believe that one tax content innovator can exceed the contribution of 10 tax renovators.

How important is communication to the effectiveness of your tax department?
Communication between the business unit and tax content providers is critical. It’s important for tax to be integrated into the business unit and to share the knowledge to deliver timely, value-added tax information that can be used in the decision-making process.

Does technology play a role in your ability to differentiate?
Absolutely. At Nestle, it’s about choosing the right technology that empowers us to maximize the use of our tax content. Technology should enable you to deliver more tax content, or deliver the same tax content in less time, which would then permit your tax team to provide additional value-added services. It also assists in attracting and retaining the best tax professionals.

Fifteen tax industry leaders recently committed their valuable time and energy toward developing a collective vision around the future of tax and a start as to how to get there. All captured in a cartoon colored “strategic” map loaded with metaphors and graphical representations of the challenges and the potential rewards that lie ahead.

It’s pretty hard to ignore … a starting point vision for the future of the tax industry … developed by leaders from the industry … no filter … no fluff… no BS!

In my mind these leaders have struck the first match … and the Tax 2.0 portal is meant to help spread the fire through the industry. It’s not going to happen without others in the industry getting involved by sharing their thoughts and becoming part of the solution toward a better future (woe … too much election-speak).

So we hope you join in and let us know what you think of the Tax 2.0 vision. Do you agree with it? Disagree? Are the four strategies to create a better future on target? Or is something missing? What should be added – to the vision map and the strategies?

I look forward to your comments.

Here I am flying US Air back to Philly after a most amazing day with a most amazing group of people at the first Tax 2.0 Executive Forum.

The goal of the Forum was to engage, energize, and mobilize executive level industry thought leaders to collaborate on a working visual model of the future of the tax industry, and create a platform for ongoing dialogue and action.

We had an independent consultant on hand to help a dozen senior tax executives work together and create a picture, literally, of the ideal future for corporate tax.  And they did it!  I am so fired up about the results.

Of course, half the room thought the vision was “pie in the sky” and may not ever happen, or at least not in their lifetime.   Hmmmm, I wonder about that.  Think about how far we’ve come…

Here I am on this jet, writing on Fujitsu Lifebook that has 10,000 times the power and utility of the computer that I first learned to write software on, a Data General mini computer, that was used to manage Vertex’s first tax rate database in 1978.

A lot can change in 30 years.  Heck, a lot can change in 10 years.  For example, what did your cell phone look like back in 1998?  Compare it to your iPhone or Blackberry now…

Where will tax be in thirty more years?  I’m 46.  Good chance I will see 2038.  And I’ll bet corporate tax looks a lot like the picture my newly visionary friends helped create today.

I can’t wait!