Business forum: Key 2017 tax issues for business

The tax action list for business leaders in 2017 is relatively short, but it is critical for organizational success. In an uncertain and disruptive business environment, the watchword for success is "nimble."

The KPMG LLP list of issues highlights how tax can continue to be a key driver of success in a 21st-century organization. Following are five action items for business leaders to consider in 2017.

For the first time in decades, the prospects for substantive tax reform appear very good — if Senate Republicans and Democrats can agree to the outlines of a major tax overhaul, or if Republicans can push through the plan on their own.

On the table: significant corporate rate reductions, a tax system where exported products are taxed more favorably than imported products (i.e. a "border adjustable tax") and special rates for pass-through income.

But U.S. tax reform will include much more than just rate reduction, and any plan may have real or perceived winners and losers. We expect that any potential reform plan that gets passed will provide the most substantial overhaul of the U.S. tax code in more than 30 years.

In light of this, business leaders need to model the impact of various proposals, aggressively engage with legislators and make their voices heard as the process moves ahead.

The Trump administration is planning to release its own tax proposal within the coming weeks.

It is expected that this proposal will either support or exclude a border adjustable tax. This release will represent an important inflection point on tax reform and could substantially alter the path for reform prospects.

For public and private companies, it is critical to stay on top of any pending changes, given the potential impact to their reported earnings. In addition, they will need to accurately measure the tax impact of any law change in the quarter in which the law is passed and reflect that impact in their financial statements.

Companies will continue to grapple with the impact of the Organization for Economic Cooperation and Development's Base Erosion and Profit Shifting (BEPS) initiative in countries where they operate this year — especially around country-by-country reporting.

On the plus side, complying with new regulations could ultimately improve their business operations. Establishing systems that unlock and share tax data across the entire organization can help companies gain a competitive advantage.

In addition to country-by-country reporting, the BEPS initiative has also forced taxpayers to re-evaluate their approach to quantifying permanent establishment (PE) risks. Certain supply chains that were historically safe from PE risk may no longer be safe under the new standards.

Lastly, taxpayers have also had to substantially enhance their transfer pricing documentation to comply with BEPS requirements.

New laws, more demands from global regulators and increased risk of tax audits are making tax compliance more complicated, time-consuming and costly. Transforming their tax departments into state-of-the-art, scalable, integrated compliance functions should be on every chief tax officer's (CTOs) agenda in 2017. Being able to access and act on information quickly, with minimal disruption to the business, can reap benefits.

In 2017, a high priority for business leaders should be digitally enabling their workforces — through data and analytics, automation, robotics and cognitive intelligence — so they remain relevant to their organizations.

Combining tax technical knowledge, large sets of data and powerful new tools can enable CTOs to help their organizations make smarter, more innovative and real-time decisions that positively impact the bottom line.

As the scope and role of the tax function continues to evolve, so do the skills that tax professionals need to be business-minded, digitally savvy collaborators within their teams and the broader organization.

While it may be tough to attract, develop and retain these professionals in tax departments, savvy leaders know that investing in rotations, cognitive training and leadership experiences will help their people to develop the skill sets and knowledge that are needed for success.

Kevin Smith is a tax partner in the Minneapolis office of KPMG LLP. He can be reached at ksmith@kpmg.com.