Study Finds Continuing Gap Between Companies' Tax And Financial Priorities

by Leroy Baker, Tax-News.com, New York

13 November 2006

Despite the higher emphasis placed on corporate governance following scandals such as Enron, there remains a significant gap between corporate America's tax and financial functions, new research has concluded.

According to 'Building a More Effective Tax Function,' a report prepared by CFO Research Services in collaboration with recruitment specialist Hudson Financial Solutions, large gaps continue to exist between tax professionals’ and finance professionals’ perceptions of how the tax function performed and what constitute high priorities at group level.

This disparity was highlighted when each group was asked about the impact of Sarbanes Oxley. While 53% of the tax respondents said that the law had a great impact, only 28% of the financial respondents came to the same conclusion.

In other findings:

• 81% of tax executives say that preventing public restatement of earnings projections and/or financial statements is a high priority. Only 48% of their colleagues in finance thought tax executives saw this as a high priority.
• 74% of the tax respondents said that improving processes for income tax accounting and for tax contingencies was a high priority improvement initiative for the next two years. Only 26% of non-tax respondents thought this was a high priority initiative for the tax function.

The study also found that 84% of respondents agreed that tax compliance activities take up a majority of the tax function’s time, as opposed to only 16% who believed most resources are devoted to tax planning.

Commenting on the findings, Andrea Gronenthal, National Director, Tax Risk, Hudson Financial Solutions, noted:

“External business forces and regulatory changes are pressing the tax function to stretch beyond the traditional role into a presence throughout the entire organization. Tax must become more engaged in other business areas, particularly involved at the front-end of business and financial decisions.

“This paradigm shift makes tax’s alignment with the finance function even more critical. Closer integration of the two will not only benefit both tax and finance, but the overall organization will see positive results.”

CFO Research surveyed 336 senior finance and tax executives at North American companies with respondents said to have came from a broad cross section of the US economy.

Recommended