September 2020

SGV thought leadership on pressing issues faced by chief executives in today’s economic landscape. Articles are published every Monday in the Economy section of the BusinessWorld newspaper.
28 September 2020 Zorayda H. Panumpang and June Catherine G. Tañedo

Computerizing accounting systems: COVID-19 spurs move to digitize

The Philippines remains under various levels of community quarantine due to the COVID-19 pandemic. Government and private offices are temporarily closed or maintain limited operations with alternative work schemes such work-from-home. These measures have naturally affected business operations and processes. There has also been a noted increase in the use of online selling platforms as companies and entrepreneurs try to continue or augment operations during the quarantine. The transition to digital platforms has not been without compliance challenges. Businesses have experienced difficulties in issuing duly authorized invoices or receipts because of the expiration of the Authority to Print, the inaccessibility of invoices and receipts, or the near impossibility of mailing or sending them during the enhanced community quarantine (ECQ) from March 16 to May 31. This greatly limited sales and collection since these documents are vital for claiming deductions and input VAT. To address this, the Bureau of Internal Revenue (BIR) allowed businesses to adopt work-around procedures such as electronically sending invoices and receipts during the ECQ, subject to certain guidelines and procedures in Revenue Memorandum Circular (RMC) No. 47-2020. These circumstances and experiences highlight the importance of digitizing business operations and processes. It is certainly high time for businesses to adopt a computerized accounting system (CAS). For those with an existing CAS, this may be the opportunity to modify or enhance it to update bookkeeping, invoicing and accounting processes. One challenge though is that the BIR requires prior authorization or permit to use a CAS, computerized books of account (CBA) and/or its components. Revenue Memorandum Order (RMO) No. 21-2000, issued on July 17, as amended by RMO No. 29-2002, issued on Sept. 16, required all taxpayers with a CAS or their components, to apply for a Permit to Use (PTU). The RMO also required taxpayers to apply for a new PTU for any system enhancement that will result in changes to the system’s release and/or version number. PROCEDURE UNDER RMO NO. 21-2000, AS AMENDED Under the RMO, all applications for CAS are to be generally filed by a company’s head office at the Large Taxpayers Office (LTO) or Revenue District Office (RDO) having jurisdiction over the head office. The application will only be processed if the RMO requirements are complete. These include documentation on the functions and features of the application, system flow, process flow, back-up procedure, disaster and recovery plan, proof of ownership, reports, correspondences, receipts and invoices that can be generated from the system with a sample layout. The application will then be evaluated and approved by a Computerized System Evaluation Team (CSET) at the BIR national or regional office. The evaluation will include a system demonstration showing actual use of the CAS. Under the RMO, as amended, the PTU should be issued within 10 to 40 days, depending on certain conditions. In the experience of some taxpayers, however, the evaluation takes longer. The delay is usually due to the difficulty in scheduling the system demonstration and addressing issues identified by the CSET during the demonstration. CENTRALIZATION OF CAS APPLICATIONS In 2015, the BIR issued RMC No. 68-2015, creating the National Accreditation Board (NAB) composed of BIR officers from various divisions in the BIR National Office. The RMC directed that accreditation of cash register machines (CRM), point-of-sale systems (POS), and other sales machines/receipting software were to be processed at the BIR National Office level only through the NAB. While RMC No. 68-2015 specifically covered the accreditation of CRM, POS, etc., the NAB also took on the responsibility of evaluating CAS applications of taxpayers registered under the RDOs. Some would say that, as a result of the centralization, the scheduling of system demonstrations and evaluation of the applications took much longer because the national body was alone in handling all CAS applications of taxpayers under the RDOs. Others believe that this has contributed to a backlog of pending applications. SUSPENSION OF REQUIREMENT FOR A PTU Early this year, the BIR issued RMC No. 10-2020, suspending the requirements for a PTU. This was carried out to promote ease of doing business and more efficient government service delivery. The RMC also reverted the processing of CAS applications to the RDOs as well as simplified documentary requirements. Specifically, all taxpayers with pending PTU applications (including those that had undergone system demonstrations) will be allowed to use a CAS, CBA, and/or their components, without the PTU, provided the relevant requirements are submitted to the Technical Working Group (TWG) Secretariat of the RDO or Large Taxpayer Office (LTO) where they are registered. These requirements include a duly accomplished and notarized Sworn Statement and various attachments (i.e., Summary of System Description, Commercial invoice/receipts/document description, and special power of attorney, among others); sample printouts of system-generated principal and supplementary receipts or invoices; and sample printouts of system-generated Books of Account. Instead of the PTU, an Acknowledgment Certificate (AC) with a Control Number will be issued by the TWG Secretariat — within three working days from receiving the requirements. The Control Number should then be indicated on the system-generated principal and/or supplementary receipts/invoices. Taxpayers should be aware that a post-approval evaluation may be conducted to check compliance with revenue issuances. This can take place during a BIR audit or investigation. For any system enhancement, modification and/or upgrade that results in a change of version number and/or systems release, the taxpayer is now only required to inform the TWG Secretariat where it is registered. This is done in writing accompanied by a matrix showing the comparative changes in the current and upgraded system. The RMC specifically referred to taxpayers with pending PTU applications with the BIR. It is not clear if this simplified procedure is the same for new applications filed after its effectivity. Moreover, the RMC provides that the BIR release separate revenue issuances on the detailed procedures implementing the RMC and the post-approval evaluation check. Pending more succinct implementation guidelines, the RDOs and LTOs may interpret the RMC differently. The issuance of RMC No. 10-2020 is one of the many steps taken by the BIR to achieve its plans for a more digitized tax environment, encouraging compliance from taxpayers by allowing them, in the meantime, to use their existing CAS without a PTU. This also gives them the opportunity to start preparing for the upcoming implementation of the mandatory e-invoicing and electronic sales-reporting requirement under the TRAIN Act in 2023. RMC No. 10-2020 is certainly a welcome development for taxpayers particularly at this time when businesses may need to digitize to adapt and thrive during the pandemic. In the meantime, taxpayers eagerly await the immediate issuance of the implementing procedures to allow for greater clarity and a more uniform and effective application of the RMC. This would, once and for all, streamline the procedures for using CAS. This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the authors and do not necessarily represent the views of SGV & Co. Zorayda H. Panumpang and June Catherine G. Tañedo are Senior Directors from the Tax Division of SGV & Co.

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22 September 2020 Jonald Vergara and Betheena Dizon

Simplifying share valuation

The COVID-19 pandemic may have unwittingly triggered acquisition activity as private equity investors demonstrate an increased appetite for Philippine companies. Despite the expected economic slowdown, investors continue to look for opportunities, with many entities needing sufficient capital to sustain their businesses. Whether it be due to corporate restructuring or a simple divestment, the sale or transfer of shares of stock in a domestic corporation remains a routine commercial transaction. Under the Tax Code, the sale, barter, exchange or transfer of shares in a domestic corporation, not traded on the stock exchange, is subject to capital gains tax and documentary stamp tax. Donor’s tax may also be imposed if the consideration for the transfer of the shares is below fair market value, though amendments to the Tax Code by the TRAIN Law emphasizes that the sale, transfer, or exchange of property made in the ordinary course of business will be considered as made for an adequate and full consideration. As such, the Department of Finance (DoF), on the recommendation of the Bureau of Internal Revenue (BIR), recently issued Revenue Regulations (RR) No. 20-2020 effective Sept. 3, which simplified the process of determining the fair market value (FMV) of shares of stock for sale, exchange, or transfer. RR No. 20-2020 Under RR No. 20-2020, the FMV of common shares is prima facie equivalent to the book value based on the latest audited financial statement (AFS) prior to the sale, but not earlier than the immediately preceding taxable year. For preferred shares, the FMV is set at the liquidation value equivalent to the redemption price as of the balance sheet nearest the transaction date, including any cumulative and preferred dividends in arrears. If the investee corporation has both common and preferred shares, the book value of the common shares will be derived by deducting the liquidation value of the preferred shares from the equity and dividing the result by the number of the issued and outstanding common shares. Thus, RR No. 20-2020 underscores the difference in the valuation for common and preferred shares, given the nature and rights of each class of shares. This clarity on the valuation of preferred shares is a welcome development since, for the longest time, previous rules did not provide details in determining the FMV of preferred shares. NET BOOK VALUE ADJUSTMENT Prior to the effectivity of RR No. 20-2020, FMV was determined following the provisions of RR No. 6-2013. The 2013 regulations prescribed that to determine the FMV of shares of stock, the book value of the shares, based on the investee corporation’s (corporation selling shares) latest AFS, must be adjusted to take into account the actual FMV of the real properties owned, if any, by the investee corporation. This net book value (NBV) adjustment requires, among others, the actual valuation of the real property by an accredited appraiser and the tax declaration of the real property as issued by the City or Provincial Assessor. The highest FMV of the real property (among the appraisal report, the tax declaration, or the BIR’s zonal value) will be used to adjust the book value of the shares for FMV purposes. Consequently, the independent appraisal report and the tax declaration must be submitted to the BIR during the processing of the Certificate Authorizing Registration (CAR) covering the transfer of the shares of stock. Without the CAR, the transfer of the shares from the buyer to the seller cannot be recorded in the investee corporation’s books. Such requirements have complicated the processes of transferring shares, depriving the government of revenue from the taxes on such transactions. The preparation of an appraisal report may take some time, depending on the properties of the investee corporations to be assessed, and entails additional costs since the appraisal report must be prepared by an independent appraiser. STREAMLINING TAX PROCEDURES FOR COMPLIANCE RR No. 20-2020 also appears to be consistent with the government’s objectives to streamline tax procedures. It can be recalled that RR No. 12-2018 (or the consolidated regulations to Donor’s and Estate Taxes incorporating the TRAIN Law amendments), expressly exempted the valuation of shares of stock of a decedent for Estate Tax purposes from the provisions of RR No. 6-2013 in requiring the valuation report. Both RRs give credence to the government’s intent to streamline procedures. We can expect the simplified requirements under RR No. 20-2020 to lead to an increase in tax compliance. Without the need for a costly and complicated appraisal report, more parties may be encouraged to transfer shares. Establishing the FMV will also be easier and will minimize disputes among parties since the latest AFS should be able to provide the FMV that will serve as the base consideration. RR No. 20-2020 can also be expected to expedite the process of securing the CAR since the independent appraisal report and the tax declaration are no longer necessary, taxpayers will need to submit fewer documents to process and secure the CAR. Implicit in RR No. 20-2020 is the need for the investee corporation to maintain its AFS, which must also be submitted to the BIR and the Securities and Exchange Commission. Since the RR now requires that book value be based on the latest AFS not earlier than the immediately preceding taxable year, it is now imperative for corporations to always have the AFS of the immediately preceding taxable year prepared. POTENTIAL IMPACT ON OTHER REGULATIONS However, RR No. 20-2020 may also have an impact on other regulations that refer to RR No. 6-2013. For instance, Revenue Memorandum Order (RMO) No. 17-2016 requires that shares to be transferred from an absorbed corporation to the surviving corporation in a merger should also be valued following the guidelines under RR No. 6-2013. Now that RR No. 6-2013 has been superseded by RR No. 20-2020, it remains to be seen how the BIR will interpret the requirement in RMO No. 17-2016 on the adjustment of the FMV of shares to be transferred in a merger, as well as whether it will also adopt RR No. 20-2020 for such valuation purposes. RR No. 20-2020 is a welcome respite for taxpayers. With greater facility of transactions comes a potential increase in compliance. In turn, improved compliance can lead to an increase in the Government’s tax revenues, which could go a long way to support Government efforts in these challenging times. This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views reflected in this article are the views of the authors and do not necessarily reflect the views of SGV, the global EY organization or its member firms. Partner Jonald Vergara and Senior Manager Betheena Dizon are from the Tax Service Line of SGV & Co.

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14 September 2020 Joanne Macainag-Cobacha

Aiding recovery: VAT exemptions on imported medicine

Health is wealth, particularly during the COVID-19 pandemic. It would seem that the government concurs when it passed Republic Act (RA) No. 9502, otherwise known as the “Universally Accessible Cheaper and Quality Medicines Act of 2008.” The RA empowers the Department of Health (DoH) to keep medicine affordable and accessible to promote the health and well-being of Filipinos. In light of this, the House and Senate included in RA No. 10963 (the TRAIN Law) a value-added tax (VAT) exemption on the sale of drugs prescribed for diabetes, high cholesterol and hypertension beginning Jan. 1, 2019. Revenue Memorandum Circular (RMC) No. 2-2018 clarified that the sale by manufacturers, distributors, wholesalers and retailers of drugs prescribed for the treatment of diabetes, high cholesterol and hypertension in its final form shall be exempt from VAT while the importation are subject to VAT. Evidently, the TRAIN Law and RMC No. 2-2018 were issued to address the objectives of RA No. 9502. However, apparently not taken into consideration when the law was passed was the effect on the pharmaceutical industry (manufacturers, importers, distributors, wholesalers and retailers) of imports not covered by the VAT exemption. VAT-EXEMPT SALES Prior to the passage of TRAIN Law, sales of drugs and medicines prescribed for diabetes, high cholesterol and hypertension were subject to 12% VAT. In turn, input VAT passed on to pharmaceutical companies from imports and local purchases of goods and services could be claimed against the output VAT. Due to the TRAIN Law and under Revenue Regulations (RR) No. 16-05, as amended, the input tax attributable to VAT-exempt sales was not allowed to be credited against output tax but should be treated as an expense. This finds support in Bureau of Internal Revenue (BIR) Ruling [DA-646-06] and BIR Ruling [DA-234-04] where the BIR held that the input taxes directly attributable or allocable to exempt transactions become part of the cost of capital goods purchased or of operating expenses. In other words, the input tax attributable to VAT-exempt sales shall not be allowed as credit against the output tax but should be treated as part of cost or expense. Input VAT from the following purchases which are directly attributable to VAT-exempt sales should be treated as follows: Purchases of goods for sale — should form part of the cost of the inventory Purchases of capital goods — should form part of the capitalized cost subject to depreciation Purchases of services/consumable goods — should form part of the operating expenses Since the VAT paid on imports is being paid and passed on to the pharmaceutical companies and forms part of the cost or expense, these companies are unable to significantly reduce the selling price to the public, which was not the intention of the legislators when the TRAIN Law was passed. INPUT TAX ON IMPORTED GOODS Pursuant to Section 110 (A) (2) of the 1997 Tax Code, as amended, input tax on imported goods or property by a VAT-registered person is creditable to the importer upon payment of the VAT prior to the release from the custody of the Bureau of Customs (BoC). To address this issue, the BIR issued RMC No. 34-2019 which provides that considering that input tax attributable to VAT-exempt sale cannot be passed on to the buyer, the inventory list as of Dec. 31, 2018 of drugs and medicine which became VAT-exempt beginning Jan. 1, 2019 is required from all manufacturers, wholesalers, distributors and retailers regardless of whether or not there is an existing excess input tax. As the sale of VAT-exempt drugs and medicines are made, the input tax corresponding to the sale shall be closed to cost or expense. It appears that the BIR, in issuing RMC No. 34-2019, has given credence to the Tax Code provision that input taxes attributable to VAT-exempt sales cannot be claimed as input tax credits but should be expensed out. Under the RMC, if the input VAT was already claimed in the 2018 VAT returns when VAT was paid on imports prior to release from the BoC’s custody, the RMC resolved to reverse the input taxes previously claimed at the time the related inventories were sold. This had a negative impact on the industry since the pharmaceutical companies were not able to recover fully the VAT paid on the importation of these VAT-exempt medicines. NEW HOPE FOR RECOVERY RA No. 11467 was signed and approved on Jan. 22, 2020. This law amended the VAT-exempt provision to now cover imports of these medicines beginning Jan. 1 2020 and to include the sale or importation of prescription drugs for cancer, mental illness, tuberculosis, and kidney diseases beginning Jan. 1, 2023. Another positive development for the industry is the issuance of RR No. 18-2020. In its transitory provisions, the RR specified that the VAT on imports of DoH-approved prescription drugs for diabetes, high cholesterol and hypertension from the effectivity of RA No. 11467 on Jan. 27, 2020 until the effectivity of RR No. 18-2020, shall be refunded in accordance with the existing procedures for refund of VAT on imports, provided that the input tax on the imported items has not been reported and claimed as input tax credit in the monthly and/or quarterly VAT declarations/returns. This is certainly good news for pharmaceutical companies, as including the imports as VAT-exempt transactions and allowing companies to claim refunds will surely help ease the strain on them during these trying times. This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co. Joanne Macainag-Cobacha is a Tax Senior Director from the Global Compliance Reporting Service Line of SGV & Co.

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07 September 2020 Clairma T. Mangangey

Environmental, social and governance factors take center stage

We are increasingly seeing the need for accelerated change in businesses to pave the way for recovery from the COVID-19 pandemic. Digital transformation has become necessary for many to continue operations, and the rules for capital markets are being rewritten as the pandemic’s economic and social impact plays out worldwide. This poses the question of how investors will direct capital to support economic recovery. Based on the findings of the 2020 EY Climate Change and Sustainability Services (CCaSS) Institutional Investor survey, institutional investors are raising the stakes in assessing company performance through environmental, social and governance (ESG) factors as they look to build insight into long-term value. Companies unable to meet investor expectations in terms of ESG factors risk losing access to capital markets. ESG information is more important than ever. The survey showed that investors were increasingly dissatisfied with the information received on ESG risks compared to 2018. At 98%, the majority of the investors surveyed signaled a move to a more rigorous approach to evaluating non-financial performance, while 91% also identified how non-financial performance played a pivotal role in investment decision-making. To meet the expectations of investors, companies must prioritize building a more robust approach to analyzing the risks and opportunities from climate change, build strong connections between financial and non-financial performance, and instill discipline into non-financial reporting processes and controls in order to build confidence and trust. A ROBUST APPROACH TO TCFD RISK DISCLOSURES Capital markets are heavily considering the potent impact of environmental disruption, with the failure to consider social and environmental risks leaving many to wonder how well-prepared capital markets are to withstand such shocks. Investors from the survey are building their understanding of the ESG reporting universe, factoring in disclosures made as part of the Task Force on Climate-related Financial Disclosures (TCFD) framework in their investment decision-making. While regulators look to companies to play a leading role in rebuilding global economies, investors are more concerned about whether risks such as climate change will be sufficiently addressed. The survey notes that 72% of investors conduct a methodical evaluation of non-financial disclosures, which is a significant jump from the 32% who said that they used a structured approach in 2018. Though the research shifts toward a structured approach, the quality of the approach remains critical. The research also shows significant investor appetite for a formal framework that allows companies to communicate intangible value, allowing investors to evaluate long-term value-creation strategies. Companies should ensure a connection between nonfinancial and financial reporting to provide investors a comprehensive view of their plans to create, communicate and measure long-term value. CONNECTING FINANCIAL AND NONFINANCIAL INFORMATION Expectation gaps between investors and companies could come at a significant price, where companies may find it harder to access capital, and investors may respond to a lack of risk insight by raising a company’s risk profile. Investors may come to their own conclusions should companies choose not to engage in ESG or weigh performance solely towards positive aspects. A growing area of disconnect is how companies disclose ESG risks in their current business models, and research shows dissatisfaction with risk disclosures rose across all areas since 2018. Environmental risk in particular is a key issue for investors, and when asked, the TCFD framework emerged as the most valuable way companies can report on this ESG information. The research also points to concerns about the provided information, with risk management highlighted as the area where investors received the least developed information. Some companies disclose that they have processes to manage climate risks in their organizational risk management system but described in general terms without the necessary connection between climate-related risks and overall risk management. BUILDING TRUST AND CREDIBILITY IN NON-FINANCIAL REPORTIN With ESG performance seen as a core element in investment decisions, it is likely that the trend of using non-financial information to determine the value of a business is likely to continue in the post-pandemic world. Investors look not only at the resiliency of a business, but also on its focus on long-term value creation. Climate change plays a key role in investor considerations because investors seek to understand what it means to companies, as well as gauge how business leaders adapt to climate risk due to its potential to disrupt supply chains and damage infrastructure. Because ESG risks will play a key role in how investors understand a company’s resilience maturity, credible ESG disclosures will be essential. Investors will only find environmental and climate change disclosures useful if they have confidence in what is reported. The investor community will therefore play an active part in driving companies toward non-financial assurance, and companies that will want to communicate their story to investors to access capital must respond to this demand. REINFORCING A SUSTAINABLE FUTURE With investors increasingly using non-financial factors when it comes to assessing a company’s performance, they also seek a formal framework to measure and communicate intangible value, as well as establish closer connections between ESG and mainstream financial reporting. Rather than distracting us from the necessity of driving a sustainable future, the COVID-19 pandemic actually reinforces it. Transitioning to a decarbonized future is a critical component to long-term company resilience as well as that of the economy, while strong ESG frameworks and strategies will be critical to recovery. Recovery itself will be closely observed by investors, and companies and national economies with an agenda for climate-resilient growth and the ability to withstand systemic shocks will have the highest potential of being seen as an attractive prospect. This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views reflected in this article are the views of the author and do not necessarily reflect the views of SGV, the global EY organization or its member firms. Clairma T. Mangangey is the Climate Change and Sustainability Services Leader of SGV & Co.

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01 September 2020 Fatma Aleah A. Datukon

Transforming tax and finance functions

As we continue to navigate the disruption brought about by the COVID-19 pandemic, companies are reshaping their operations in the new normal to focus on business continuity and to prepare for recovery once the economy bounces back. Part of this transformation strategy is to revisit and reimagine the tax and finance function. The 2020 Tax and Finance Operate (TFO) survey sponsored by EY and conducted by Euromoney Thought Leadership Consulting with over 1,000 executives representing 42 jurisdictions (including the Philippines), 17 industries and 178 publicly listed organizations, demonstrated that the tax and finance function in organizations is generally struggling to cope with digital advances and rapidly evolving global and local conditions. While the survey was conducted before the pandemic, nearly all respondents (99%) indicated that they are taking steps to transform their tax and finance operating models due to deficiencies in their current target operating model. Meanwhile, 73% are looking to co-source critical activities in the next two years as a solution to relieve growing pressures. This also aims to aid in successfully adapting to the constantly evolving tax environment and rapidly transforming digital landscape, which have been amplified by the unforeseen business and human impact of COVID-19. DEFICITS IN DATA AND TECHNOLOGY TRANSFORMATION Based on the survey, 65% of respondents cited the lack of a sustainable plan for data and technology as their biggest barrier to delivering the tax function’s long-term purpose and vision. In fact, 73% of the respondents said that their organizations do not have a formal tax technology strategy in place. The unprecedented operational disruption due to the pandemic — where organizations struggle to manage business continuity amidst the abrupt need to shift to telecommuting and develop digital workspaces — only highlighted the deficit in the technological capabilities of most organizations. This has brought the urgent need for digital readiness in organizations to the forefront. Contributing to the urgency are the growing demands for tax and finance functions to quickly and effectively respond to the dynamic tax landscape, due in part to the Philippine government’s tax reform programs and the implementation of the digital transformation roadmap, which is a priority program of the Philippine Bureau of Internal Revenue (BIR). Organizations that are not pushing to operate in new ways or investing in data and technology adoption (e.g., automation, cloud storage and data governance, data analytics and reporting) may eventually find themselves at a competitive disadvantage. This is in comparison to others that have fast-tracked their digital transformation and have integrated digital technologies into their tax and finance functions to manage tax risks and provide greater focus on value generation. EVOLVING TALENT NEEDS Under their current tax operating models, 62% of the survey respondents spend majority of their tax function time on routine compliance activities. Examples of these include data collection and processing, workpaper preparation, tax returns and reconciliations — as opposed to higher value/higher risk activities — with nearly half (45%) of the organizations struggling to provide new responsibilities and career advancement opportunities for their tax and finance personnel. With the move towards digitally transforming the tax and finance function, a corresponding reimagination of the tax and finance workforce would necessarily follow. This will, however, pose a challenge for organizations to search for and retain the appropriate talent in today’s evolving tax and finance function. In fact, 83% of the survey respondents believe that the core technical competencies of their tax and finance personnel will shift from traditional technical skills to data, process and technology skills over the next three years. However, 61% admit that they are unable to attract and retain talent with the skills required for the tax and finance function of the future. As talent demands continue to evolve, organizations will have to revisit, reskill and/or upskill their tax and finance workforce. This can be achieved by either providing their current employees with the necessary learning and skills development (e.g., digital fluency, data analytics proficiency) to cope with the evolving tax and finance function, or by considering an entirely different strategy to bridge the talent and skills gap (e.g., establishing new tax operating models, co-sourcing) to improve the financial operational effectiveness and efficiency of their tax departments in the new and next normal operations. TAX AND FINANCE OPERATE (TFO) SOLUTIONS Organizations need to use the right mix of people, process and technology to maximize the value of their tax and finance functions and meet the evolving organizational goals now and in the future. One way to do this in the shorter term is by engaging an experienced external TFO solutions provider who can deliver a customized and flexible technology-driven tax service delivery model that can help business leaders reimagine their tax and finance functions. With the right TFO provider, organizations can achieve a sustainable corporate tax function that can support their strategic efforts and bring new innovation and transformation to their tax function. ACCELERATED TRANSFORMATION In today’s highly dynamic tax and regulatory environment, which has been further complicated by the COVID-19 pandemic, sustaining a strong and stable tax and finance function with the right technological and talent capabilities may be one of the most difficult challenges of an organization. In order to more effectively navigate through these changes, organizations should consider accelerating the transformation of their tax and finance functions into agile and cost-effective tax operating models. This will allow businesses to prioritize long-term value creation and risk management as well as redirect valuable internal tax and finance resources to more strategic activities and efforts. A focused effort will manage and boost business continuity and resilience, achieving operational optimization for the now, next and beyond. This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co. Fatma Aleah A. Datukon is a Senior Director of SGV & Co.

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