Seating Tax at the Strategy Table / Tax professionals should have more input into strategic decisions, say finance chiefs.

Katherine Teitler for CFO Magazine writes: Companies routinely consider the effect of taxes on their financial performance, but how often do they incorporate tax considerations into their strategic decision making? Not nearly as often as they should, according to senior finance executives who responded to a recent study by CFO Research.

Tax departments are already under pressure from aggressive tax enforcement, heightened demands for transparency in tax reporting, and ongoing resource scarcity. Even as they deal with all this, CFOs say, it’s important for the tax function to provide insightful tax planning and decision-support services to business-unit managers. Fostering an effective and efficient working relationship between tax and the business not only leads to lower tax rates, but also is vital for avoiding the kinds of tax mistakes that can turn a bold strategic move into a financial disaster.

In its study, “Finance Views on the Tax Dimension of Strategic Decision Making,”sponsored by Vertex Inc., CFO Research surveyed and interviewed more than 100 senior finance executives on the ways that finance executives can help their companies maximize the value of business decisions — and, ultimately, boost financial performance — by incorporating tax considerations more effectively. The results were clear: Eighty percent of survey respondents agreed with the statement, “Over the next two years, my company could benefit substantially by better incorporating tax considerations into strategic decisions.”

Survey respondents were asked to identify the most valuable benefits they thought their companies could realize by improving the performance of their tax functions. Topping the list were a lower effective tax rate and higher earnings per share (named by 47% of respondents), followed by better business decision making (30%). These responses outstripped the more traditional and indirect benefits of tax planning, such as greater accuracy in financial reporting or faster consolidation and close. (See Figure 1, below.)

Executives interviewed for the study emphasized the value of including tax specialists in important business decisions. Says Charles de Rosa, vice president of tax for National Grid, the large utility company, “We could be making a decision that has tax consequences that, if the business doesn’t know about them, could result in a different yield than the business would otherwise be expecting.” [snip]  The article continues @ CFO Magazine, click here to continue reading...