Add senior tax executives to the long list of finance-related professionals who have benefited from the Sarbanes-Oxley Act of 2002. According to a new survey from KPMG LLP, Sarbox Section 404 compliance work has dramatically lifted the profiles for senior tax executives, particularly with audit committees and boards of directors.
Specifically, 57 percent of 98 senior tax executives said they believed both their role and stature had grown with peer groups during the past year, while 58 percent and 42 percent of respondents reported greater visibility and prominence before audit committees and boards of directors, respectively. The upshot: top management is now more likely to provide additional tax department resources, as 92 percent of the survey respondents indicated plans to add staff in the next 12 months.
“It’s clear that the additional responsibilities related to Sarbanes-Oxley Section 404 compliance work have pushed tax executives and their departments to a higher level of prominence in Corporate America, especially at the corporate governance level,” says Brad Brown, KPMG’s national tax leader for Sarbox Section 404.
Of course, Sarbox has been a boon in general for the accounting profession, which is experiencing nearly full employment, huge signing bonuses, and large annual salary increases thanks to a stepped-up demand for its services in the face of a declining graduation rate of new accountants from colleges.
According to the KPMG survey, the new Sarbox responsibilities also bring an increased workload for tax directors. For example, 92 percent of respondents said their department’s workloads had grown significantly as a result of 404 compliance work, while 90 percent also cited increased documentation requirements for tax accounting. “This shift demonstrates the key role that tax plays in corporate financial statements, particularly at a time when the highest standards of financial management are paramount,” stated Brown.
The survey also found that nearly one-third of tax executives said they have added full-time senior tax personnel during the past 12 months, with one-third increasing their staff by more than 25 percent. In addition, nearly half said they are planning to modify their tax department structure in the next 12 months.
“More than half of the tax deficiencies reported during the first round of Sarbanes-Oxley 404 compliance related to tax staffing shortages and competency issues,” says Brown. “Companies are clearly reassessing their tax operating models and allocating more resources to tax departments to address work created by Sarbanes-Oxley compliance and increased tax accounting requirements from regulators and others, such as the Financial Accounting Standards Board.”
Not surprisingly, 57 percent of the companies surveyed said they are outsourcing some of their tax-related functions. The most common task: non-U.S. income tax compliance (36 percent), followed by U.S. income tax compliance (23 percent). “Many tax directors and CFOs are now working together to find the right level of co-sourcing,” says Tom Garigliano, KPMG’s partner in charge of global tax outsourcing. Their goal, he noted, is to take advantage of in-house knowledge while also tapping outside resources in specific areas, such as tax.