Ben Scull – Managing Director | ANZ Tax & Accounting
Core theme 1: Disruption and the future of the industry
Q1. What disruptive trends are impacting the tax and accounting industry in 2016?
- Disruptive trends are everywhere. Consider Uber, who has been frantically adding drivers to keep up with intense demand since its official launch not even five years ago. Interestingly Uber’s ascent is now being challenged by a company called Lyft who announced it is partnering with General Motors to create a network of self-driving cars that will pick up and drop off passengers at the touch of a button. And they’re not the only ones eyeing the self-driving opportunity. Google® and Tesla have been working on driverless cars for some time. For Uber, it isn’t if driverless cars will be developed, it’s when.
- But while we all know the Uber success story, what about our own industry and what about closer to home?
- The rise of financial technology or the “fintech” sector is a good place to start – the Australian government recently provided a boost to Australia’s fintech sector through providing funding to Stone & Chalk, a technology hub created to focus exclusively on cultivating Australia’s fintech eco-system.
- The government has also recently set up an expert advisory group to help make the country the “leading market for financial technology” in the Asia Pacific region, competing with the likes of Hong Kong and Singapore.
- The message is, to survive – and thrive – businesses need to continually adapt in today’s tech-dominant world. Accountants across Australia and NZ should be aware of on-going developments.
- PwC’s recent global fintech report for 2016, for example, forecast that banks worldwide are bracing for the loss of about 25 per cent of their revenue to financial technology disrupters in the next five years.
- In Australia, non-profit superannuation funds are being told to catch the fintech wave. The Australian Institute of Superannuation Trustees CEO Tom Garcia said at a conference earlier this year, “the big competitor for the super industry is the internet and super funds must improve their services. Without taking on Fintech, the super industry will lose profit for the members.”
- The advent of Bitcoin is likely to have huge ramifications on the accounting industry – no doubt a range of issues will arise around how Bitcoin is taxed as the digital currency develops for example. Interestingly earlier this year RBA touted that Australia could introduce a digital version of its dollar, albeit in the distant future and likely to circulate in parallel with old fashioned notes and coins.
- Blockchain is also something everyone in the industry should all start getting our heads around because of how it will shape out future roles. For example, as accounting, auditing and compliance place large costs on business globally, Blockchain accounting could help cut those costs. Instead of a company employing its own auditors to examine the books of its various units, all transactions could be logged on an internal blockchain and recorded centrally.
- I think the important message is that accountants need to understand that they’re not immune from disruption and we should all start to be aware of how these trends are impacting and shaping the industry of the future, globally as well as here in Australia and New Zealand.
Q2. There is a lot of talk about millennials these days – how are they changing the face of our industry?
- Millennials are having a huge impact in re-shaping our industry.
- We know that millennials are starting to outpace baby boomers as the largest percentage of the population and will soon be the largest generation in the workforce – they are the new clients for whom your firm will compete. They are far more digitally sophisticated. They grew up with technology, so they expect to be served differently. They don’t have the patience to work with professionals who – in their minds – operate with outdated processes and a traditional accountant mind-set.
- Millennials are going want to interact with the firm over the Web. They’re coming and asking for technology-based solutions faster than the generations before, especially the younger entrepreneurs and small business owners.
- They are used to banking, managing their investments and working with their service providers online. Anytime. Anywhere. Any device. A service business without options for customers to connect with them online is one that has long let the world pass it by.
Q3. How do you see the accounting firm of the future?
- The accounting profession is likely to move to advisory-based services. Clients are looking for one- stop shopping, for holistic financial and business consulting and compliance work.
- Firms need to serve their clients with a mind- set toward optimizing client experience. That’s part technology, part relationship, and part offering true solutions – not just after-the-fact reporting and compliance work.
- In my years of experience, I’ve learned that clients initially come to their accountant with a simple request, like “file my tax return” or “handle my payroll.” However, they really want much more. “File my tax return” often means “help me with tax strategy” and “handle my payroll” often equates to “I’m interested in outsourcing my payroll and HR functions.” The question is, does your firm have the ability to capitalize on these opportunities?
- It can, if you move to an advisory-based model that focuses on providing a consultative approach to serving clients. It’s a choice that will pave the way for your firm to offer new services that are highly valued by clients leading to higher revenues, improved profitability and higher client satisfaction. The reality is that many accountants are overloaded with tedious work and have lost the spark that once drew them into accounting. After all, most of us did not enter the profession for our love of cranking out tax returns and building financial statements. The true value of moving to an advisory-based model is that it will not only allow you to better serve your clients, but it will reignite your passion and enable you to do what you started out in this profession to do – help others.
- In the end, the firms that will withstand disruptive trends must be in synch with changes in technology and elevate themselves to be connected advisors rather than after-the-fact reporters of financial or tax information. They also need to realize that accounting and reporting are only part of a good client relationship. Today’s clients expect them to bring new ideas, proactive thinking and a higher level of customer service. This means redefining what they do, how they do it and whom they serve.
Q4. What role is Thomson Reuters playing in all of this?
- Technology and content solutions which can adapt to continuous change
- Tax reform, new accounting standards, offshore, fintechs – platforms like ONESOURCE 2016 have been built with this in mind
- AI, Machine Learning, Robotic Accounting etc – providing content/information to enable these solutions to provide real tangible benefits to firms
- Providing solutions to enable accounting firms to change models to meet customer needs:
- Cloud based which enables firm and customer to interact seamlessly
- Information available through multiple mediums due to the way customers (millennials) want to operate
- Gamifying then Learning experience
Core theme 2: BEPS Readiness? (Base erosion and profit sharing)
Q1. Thomson Reuters recently launched the findings of its 2016 BEPS Readiness Global Survey – can you shed light on some of the key findings?
- The OECD’s base erosion and profit shifting (BEPS) project has spurred some of the most significant changes to the taxation of international business in nearly 30 years. It developed the BEPS Action Plan, at the request of G20 countries to help nations align their corporate tax policies.
- As BEPS becomes closer to a reality for multinationals everywhere, many are ﬁnding that they are underprepared to meet its requirements, particularly regarding BEPS Action Item 13, which deals with transfer pricing documentation and Country-by-Country Reporting.
- Perhaps this is because the idea of standardizing international tax has been viewed as ambitious. Perhaps it is because the creation of the BEPS framework has played out as a slow drip rather than a ﬂood. Perhaps it is because of lagging regulations to outline requirements.
- For whatever reason, many companies have only recently realized that the clock is ticking and that they are on the ropes.
- One of the key findings from the recent Thomson Reuters BEPS Readiness Survey shows that two-thirds of corporate tax executives surveyed say their companies are proactively preparing for the onslaught of new tax regulations resulting from the Base Erosion and Profit Shifting (BEPS) Action Plan.
- That’s a 22% increase in the past year. In addition, 54% of respondents in 2015 said they were actively preparing for the new reporting requirements. This year, it’s 66%.
- The survey found European companies are more intensely focused on BEPS planning than their peers around the world. Three-fourths of respondents from companies based in Europe said they are proactively preparing for BEPS, up from 59% last year. In the U.K., it’s 80%. That compares with 71% in Latin America, 64% in the U.S., and only 40% in Asia Pacific.
- The disparity may reflect the varied pace at which countries in each region are implementing BEPS regulations.
- Preparation for BEPS compliance is a daunting operational burden on multinational companies as they work to keep up with the growing list of new and changing global regulations. While it’s encouraging to see that more companies are preparing for BEPS, many corporations are still not doing enough to prepare for the compliance risks ahead.
- In 2015, The OECD issued 15 Action Items to address areas such as the digital economy, treaty abuse, and transfer pricing documentation. Most survey respondents (83%) said documentation and country-by-country reporting for transfer pricing, related to BEPS Action Item 13, has required the biggest operational changes. This is consistent with last year’s findings. Across all countries, audit exposure is cited as the biggest issue related to Action 13 compliance.
- The research also found significant regional variance in the time tax departments are investing in BEPS preparation. Respondents from the U.K. are spending the most time on BEPS preparation, with 28% saying their departments invest more than 15 hours per week on the project. The U.S. lags behind, with 50% of respondents saying their departments spend fewer than two hours per week preparing.
- Respondents also report making changes to their business operations as a result of BEPS. Over half have changed their transfer pricing policies and conducted a review of their business’s value chain and key profit drivers.
Q2. What about BEPS from an ANZ Perspective?
- Slow to adopt
- Uncertainty around process and owner
- Tax teams struggling to absorb the compliance burden
- Companies overwhelmed with amount of tax changes (AMIT, FATCA, CRS, CBC etc)
- Tax teams need to prioritise and manage change based on risk tolerance
- Forefront of Transfer Pricing and therefore familiar concepts and requirements
- Schedule 25A, IDS etc
- Less than 200 Companies impacted in ANZ