Within tech organizations, tax leaders are seen as critical to business strategy, with most respondents reporting they are regularly consulted on business decisions. Unsurprisingly, tax leaders are most likely to be involved in areas with clear financial implications, like restructurings and deals. Tax leaders are consulted less often in areas like workforce and geographic expansion.
Human resources and payroll often neglect to include tax leaders when they’re making key decisions like hiring employees or selecting a professional employer organization (PEO) to support the payroll function. These decisions can have tax consequences that are often uncovered too late. For example, remote workers can carry tax implications based on the state in which they live, which should be considered as part of the hiring process. The tax department can play a key role in reducing tax liability by ensuring workforce decisions are tax advantageous.
Tax leaders should also be more involved in geographic expansion. Failure to account for tax considerations during a geographic expansion can have expensive consequences. For example, moving an asset out of certain countries can incur exit taxes, which can lead to significant tax liabilities if not accounted for during the planning process. Without proper planning, companies may also miss out on key tax savings in the form of federal, state, and local incentives.
If tax leaders aren’t already invited to the table for these key decisions, they should proactively seek involvement to ensure that the organization makes choices that align with its overall tax goals. For tech companies specifically, the tax department should seek involvement in partner agreements, such as those with independent contractors and referral networks, which can be structured to be tax advantageous. By ensuring their experience is accessible during major business decisions, tax leaders can mitigate tax risk, identify new opportunities, and optimize total tax liability.
Total Tax Liability Is Increasing