Limited by outdated technology and a more binary approach to tax, co-sourcing hasn’t previously been popular within the tax industry. However, the ability to strike a balance between handling everything in-house or outsourcing everything to external firms – the essence of co-sourcing – has become more attractive over the past couple of years as tax teams have adopted cloud technologies enabling collaboration between internal and external teams.
The emergence of the Organisation for Economic Cooperation and Development’s Pillar Two is accelerating this demand further. In fact, Deloitte now estimates 41% of companies will co-source thanks to advances in software, cost considerations and a shortage of Pillar Two experts. So, let’s look more closely at how and why Pillar Two is driving these changes.
The growth in co-sourcing popularity
As the number of tax regulations and obligations continues to grow, tax professionals are rethinking their approach to tax management with new priorities in mind: making the entire process more efficient, precise and robust in the face of an evolving legislative landscape.
Tax authorities are requesting more and more tax data, meaning in-house tax professionals are under increasing pressure. However, the sweeping reforms introduced by Pillar Two in global tax management impose a significant additional burden to those in scope, threatening to stretch in-house teams to their limits.
Managing all these extra demands related to Pillar Two is a challenge in terms of cost and time, given the amount of data and computation involved. That’s a primary reason why more businesses are choosing to co-source select tasks to third-party specialists. Combining the best of both worlds will deliver notable efficiencies in terms of enabling Pillar Two compliance.
Co-sourcing and collaboration
Until recently, most tax teams worked in one of two discrete ways – an all-or-nothing approach to outsourcing. However, the advent of cloud-enabled automated tax platforms for handling routine operations has made it simple for internal tax professionals to work collaboratively across multiple locations and territories. It has also eliminated the obstacles that used to make it challenging for organisations to kick off co-sourcing tax models that allow them to select precisely which tasks to outsource and which to manage in-house.
In this context, these cloud platforms enable consultants and companies to access the same data, systems and workflows, leading to collaboration that underpins the outsourcing of specific tasks. Consequently, corporations can strategically leverage external advisers for high-value activities, accessing the specialised Pillar Two expertise they require while freeing in-house teams to concentrate on essential tasks like data collection and tax planning.
Co-sourcing and the tax landscape beyond Pillar Two
The global tax regulatory landscape has shifted with the introduction of Pillar Two, driving many businesses to deploy co-sourcing models, which provide creative and selective access to the expertise, tools and resources from external providers. Now, companies can strengthen their existing skills while relying on third parties to offer missing expertise and deliver routine tasks at scale.
This is a tech-led epoch of collaborative working that will redefine how accounting firms and external consultants work together. As it evolves, expect to see co-sourcing approaches become more commonplace across businesses, embracing everything from VAT to corporate income-tax filings. With corporates buying software for compliance and advisers providing specialised support, co-sourcing offers the best of both worlds, and a more simple, effective and inexpensive approach today and in the future.
