ISLAMABAD: A global analysis by the Association of Chartered Certified Accountants (ACCA) has concluded that the trend for governments to raise more revenue from indirect taxes is expected to continue, demanding a different approach to tax management as some tax jurisdictions like China and Singapore may abolish direct personal and corporate taxation by 2025.
According to an international accountancy research of the ACCA, tax is the mechanism governments use to raise funds, regulate behaviours and redistribute income across society. Taxes can be levied on income, wealth and consumption and can fall on both individuals and legal entities. A number of factors have made it difficult for governments to devise, impose and collect the taxes to maintain their tax base. These include shrinking and stagnant economies, the dominance of multinationals in the global economy, electronic trade and process automation, more mobile and sophisticated taxpayers and the competitive environment in which national tax systems operate.
Over the next five to 10 years, all this will make tax advice, compliance, reporting, planning and risk management even more complex than they already are.
The trend for governments to raise more revenue from indirect taxes is expected to continue, demanding a different approach to tax management. By 2025 some tax jurisdictions (such as China and Singapore), may have abolished direct personal and corporate taxation, with a corresponding impact on all taxpayers and their tax advisers. Meanwhile, the introduction of the ASEAN Economic Community (AEC) is expected to have an impact, by increasing tax competition between member countries as they seek to attract foreign direct investment.
The increasing influence of, and interaction with, stakeholders who are not tax specialists will require tax professionals to take a more inclusive and risk-oriented view of business in the years to 2025. They will need to think and plan commercially and strategically.
The report said that the accountancy profession has always helped to shape and support businesses, other organisations, and economies of all types and sizes. To continue to add value, professional accountants – and those who educate and employ them – must be able to meet current needs and anticipate emerging demands. The fast pace of change in digital technologies, the globalization of business, and the tailwinds of the 2008–9 global financial crisis are among many factors that make this particularly challenging. ACCA has conducted global research to inform its future thinking and it is sharing the results so that they can also inform the future plans of its stakeholders.
It said that the professional accountants involved in tax advice, compliance, reporting, planning and risk management will be most keenly aware of these developments, as they must assess the associated technical, practical and ethical challenges and communicate these effectively to an increasing number of stakeholders.
All professional accountants will be expected to develop and demonstrate the ability to look beyond the numbers, beyond finance and beyond the business, it said.
They must collaborate and form partnerships with people in other parts of the business and outside the business; interpret and explain the numbers; provide insight and not just information; help organizations to achieve short-term goals and long-term objectives; think and behave more strategically; be more proactive; and become more involved in decision-making.
Many more professional accountants will need basic knowledge of Islamic finance, Shariah compliance, and Islamic capital markets; some will need to become experts.
From now on, all professional accountants must complement strong technical skills and ethics with strong communication skills. There is a large skills gap in the communication skills area. Professionals specializing in strategic planning and performance management suggest newly qualified accountants lack the skills to deal constructively with confrontation and lack the confidence to make necessary challenges.
As the global need for professional accountants is expected to increase, an internationally recognized qualification offers the possibility of moving into markets and sectors where the need is strongest.
Over the next decade, some areas of the profession and some roles within it will necessarily continue along reactive trajectories. Others will be more proactive, with professional accountants becoming more involved in conversations on the future of their organizations and emerging as leaders whose skills, knowledge, experience and insights will shape strategy.
The audit and assurance is entering a period of great change. Over the next decade, a nexus of converging forces in business, economy, society, science and technology, politics and law will change the practice of audit and assurance, the services offered and the way they are delivered. Firms and individuals will need the technical knowledge, IT expertise and interpersonal competencies to adapt, and to ensure that they have the necessary professional quotients (PQ), report highlighted.
More action will be necessary to develop the interpersonal competencies needed to communicate effectively. Nearly two-thirds of auditors say that career development is not a priority at their firm and that more mentoring, coaching and face-to-face feedback would be appreciated.
Audit firms are expanding their technology use and expertise; particularly analytics. Nonetheless, a Google search today can reveal more data than any assurance report, even if much Google data is un-assured. By 2020, stakeholders with internet access will have the tools to analyze ‘big data’ – if not the technical knowledge or experience to interpret it. By 2025, Google may supply automated tools that provide more assurance services than all the professional accountants in the Big Four.
ACCA said that the scope and amount of corporate reporting is expanding. Contributing factors include the increasingly global nature of business and investment, and the growing power of large corporate and of internet-enabled stakeholder activists.
ACCA research suggests that financial management will become more difficult over the years to 2025. Supported by the increases in global mobility of labour and process automation, the standardization and centralization of finance processes will continue, leading to fewer autonomous divisions. There will be more centralized shared-service centers inside and outside organizations and more outsourcing and off-shoring. Senior financial managers will need to provide strategic insights into optimal reorganization across multiple parts of the business and multiple geographies, managing the skills and building the relationships needed to manage both the resources and the risks. By 2020–25, senior financial managers will be more exposed.
By 2025, being multilingual, understanding different countries and cultures and how people interact with their colleagues, will be as important as technical skills. Some senior financial managers are already building teams where strong communications skills and diversified cultural and working backgrounds are seen as the essential foundation on which to build technical finance skills.
Tax professionals will need to harness all their technical expertise, business awareness and interpersonal and communication skills if they are to keep pace and reconcile their duty of care to clients and employers with the new politics of tax.
The 10 tax competencies expected to be most important over the next 5 to 10 years including global tax perspective, communication, business attitude and awareness, technical tax expertise, risk assessment and management, professional ethics, IT knowledge, advocacy and negotiation, laws and regulations and specialization.
The 10 governance, risk and ethics competencies expected to be most important over the next 5 to 10 years included corporate governance, risk management, professional and corporate ethics, technology awareness and application, communications, board directors and committees, professional scepticism and critical thinking skills, internal control, review and compliance, global perspective and long-term and holistic perspective, ACCA added.