Addressing Tax Risk: Key Insights and Strategies
As you plan for potential tax policy changes under the new presidential administration, take the opportunity to identify and mitigate tax risk issues. According to the 2024 BDO Tax Strategist Survey, only 40% of respondents had implemented a tax risk mitigation and response strategy, which involves a proactive approach to preparing for changes that affect an organization’s tax risk profile.
Just over one-third of respondents had leveraged tax technology to mitigate risk of human error and highlight data anomalies, and less than a third reported that their tax teams have a culture of compliance embedded into everyday workflows. More than 80% of respondents identified environmental, social, and governance risks — such as stronger reporting requirements and meeting increased internal and external expectations — as tax challenges.
Given those statistics, it’s clear why tax leaders have identified their top three greatest sources of tax risk as:
- An inability to keep up with changing regulatory requirements;
- Technology challenges and/or outdated tax technologies; and
- Rapid growth, whether organic or through acquisition.
When asked how their organizations would respond to increased tax risk, tax leaders in the survey identified three primary approaches:
- Upgrading tax technology to reduce errors;
- Increasing outsourcing or co-sourcing; and
- Increasing training.