Partnering with regulators, collaborating with competitors, not to mention chatbots and creative new taxes – the tax and legal landscape is set for fundamental change post-COVID-19. KPMG global tax and legal leaders Jenny Clarke and Stuart Fuller, panellists at Thomson Reuters’ recent Return to Better conference, share their predictions for the future of their industries.
Stuart Fuller, Global Head of Legal Services, KPMG Australia
The legal industry as we know it is not going to survive COVID-19. The changes we are seeing are going to be permanent.
The key paradigms to look at are:
1. Ways of Working
First, ways of working are going to be digital and remote, as we’ve already seen, but it will also be highly interconnected with the wider ecosystem for both the business at one end to the external suppliers at the other end. Everybody will be expected to play in these digital collaborative spaces. We don’t think that means that the office is dead, but we think it creates a lot more flexibility in the way that work is done. And what COVID-19 has done has been proof of that concept.
Secondly, the make-up of the workforce will change with more automation, chatbots and other forms of productised legal services, each of which needs to be supported by a core team of lawyers and a more multi-disciplinary workforce with different skill sets. For example, we’ll need skilled legal technologists to keep the productised legal services up to date and ensure (internal) customer success. We are also going to see the next iteration of legal gig workers who will be able to plug into systems and perform a role, wherever they may be.
3. Supply Chain
Thirdly, the whole supply chain is going to go through a transformation. We think there’s going to be more emphasis on agility and greater collaboration across firms, across corporate departments and other service providers. So, in many ways the artificial divides that separate these different groups of people and organisations will disappear. And we think the industry will shift to a mixture of collaboration and competition, driven by a combination of skills, capabilities and solutions that are in the client’s interest. So, stop looking at it through a provider’s eyes, look at what is the right and the best thing for the client and how do you collaborate with partners to deliver that, even if in some circumstances you would otherwise compete with that partner.
4. Managed Services
Finally, we expect so many ‘business as usual’ tasks will be wrapped up into a managed service, and we suspect this will be a combination of off-shore and near-shore providers, so that the core legal team can focus on the strategic corporate defender role and the business partner activities, as well as supporting the business to improve the customer experience and drive revenue generation, in the new business reality we’re in. In some ways this is the second round of the business process outsourcing that started decades ago across services like payroll, but now involving more complex and higher value business as usual tasks.
Where does transformation start? First, we have to face up to the new expectations of the business and the available budget to support what’s required. This will require taking a good hard look at ourselves and how we’ve been operating in terms of resourcing, infrastructure and relationships. General counsel will need to create a new vision for the function which aligns more closely with the new business reality, and then go about building that new function with the above paradigms front of mind.
Jenny Clarke, Asia Pacific Leader of Tax Transformation and Compliance, KPMG Australia
As we start to emerge from the COVID-19 environment and business slowly starts to open up, there will be an increased community demand for transparency and oversight, which will in turn lead to more and more reporting.
Governments will be short of money and we can expect more regulator intervention. Innovation in transformation, technology and automation solutions will continue, but at an accelerated rate.
There will be ongoing volatility in our markets, and pressure on all businesses for cost containment will likely continue for some time. To achieve this cost containment, there will be increased pressure on both salary costs and how to manage with less people.
Technological solutions will become a necessity
Transformation of the tax function is inevitable and technology solutions will become a necessity.
What our organisations do will be to some extent led by what our regulators are doing.
It’s clear that our regulators will become more aggressive in the need to collect cash. As part of that mission, it is likely that they will increase the use of data to drive compliance and tax payments.
Automated data feeds, regulated invoicing systems, and invoicing matching will continue to rise. We will start to see more and more of this across the globe. There will be a greater collection of taxes through withholding mechanisms and reverse charge collections. And the likelihood of higher consequences of non-compliance is great.
I believe we’ll get to see a whole lot of new – and very creative – taxes imposed and incentives offered all around the world. And this is good, because it will mean there is still a need for good tax professionals around the world!
Tax will start to take control of its own data issues, and not be a receiver of these products and, given Revenue authorities are starting to know more about you than you do about yourself, the winners may be those who partner with – and not fight – those regulators.
Looking even further to a post-COVID future, the world of tax will continue to change rapidly, with a corresponding need for quick, speedy and sometimes risky actions. So, tax people will need to become more entrepreneurial in the way we approach change.
We are living in amazing times and it’s a very exciting time for tax professionals!