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The Evolving Role of the Tax Department (from an accounting professor’s perspective)

CSC Corptax® sat down with Matthew Sargent, Clinical Assistant Professor specializing in Accounting and Emerging Technologies at University of Texas at Arlington, for his views on the corporate tax department’s changing role.

We’re hearing more about data science in the accounting field. Based on your accounting and technological expertise, how does technology influence Tax?

The way technology and data affect accounting today is no different than how they influence pretty much everything else. From a Lion King perspective, it’s “everything the light touches.” This requires practitioners, regardless of their accounting area of expertise, to reinvent themselves and start using the power of data to elevate themselves beyond build-a-widget tasks. It requires a deeper level of thinking and understanding.

For example, in my Accounting Information Systems class, we talk about the information value chain, which is turning data into information. That information then becomes knowledge, and that knowledge facilitates decision-making. While the formal information value chain seems to end with a decision, there’s a critical component missing, and that component is taking action. Until you act, you’ve just made a choice to act.

So what accounting practitioners, Tax included, will be increasingly pushed to do is understand the information value chain. What is the data? What type of information does it hold? What kind of knowledge does it help us build? And then, what decisions can we make based on that knowledge, and what actions can we take. Through this, we can understand things we didn’t realize we were seeing. That leads to better decisions which, in turn, drive smarter actions. From a data analytics perspective, this takes us from basic forms of descriptive and diagnostic analysis to more advanced forms of predictive and prescriptive analysis.

This practice puts tax professionals into the “trusted advisor” role, which gives tax people a great opportunity because of the connection with and knowledge they have about their organizations. The “trusted advisor” skillset will be needed, really, in all areas of accounting and Tax.

What do you see as the engine driving this evolution to technology?

Big data is the low hanging fruit in terms of what’s driving the evolution to technology. But big data is not a new concept. Just as the concept of data analytics isn’t new. As accountants, we’ve been analyzing data since the 1950s—so for 70-plus years. What’s different today is the amount of data and its velocity. Data’s changing dynamic is really the engine driving the shift: how much, how fast, and how comprehensive it is. How we’re able to pull data from things we could never pull data from before.

And then you add things like 5G and other pipelines that are so much bigger, and we’re able to connect so many more things together. Now your fridge tells you you’re out of milk, or your doorbell tells you who’s there. You’ve got all these different components giving us more information to create more knowledge. And once we accept that it will never stop, that it’s just going to get bigger, faster, and more connected, the question becomes, what will we do with the knowledge? So, from a Tax and tax software perspective, how will we think about the increased amount of added information our software will continue capturing. This will drive different decisions, whether you’re a provider or recipient of services.

When you think about individual tax accountants, what characteristics will position them for success going forward?

Tax accountants will have to be able to think critically and cultivate reflective judgment, period, full stop. Reflective judgment is when you get into higher end thinking, and you realize that information is fluid, knowledge is fluid, decisions are fluid. Decisions can change based on information you have now that you didn’t have 15 seconds ago. Where people struggle is in their ability to continually accept those changes; it’s a big shift for many people.

The individuals who will elevate themselves, not only as tax accountants but as savvy business people in general, will be those comfortable knowing that, “I might tell you something right now that I may have to change tomorrow based on new information.” That’s a completely different way to use your brain. It requires constant interaction with information as it changes—not just typing a term into Google and clicking the first result and saying, “Sweet. I have all the info I need to make a decision.”

So, the days of tax accountants simply sitting there and filling out 1040s and 1120s are pretty much over. That’s not the job anymore.

As a software company, we sometimes say, “Software is great at A + B + C = D, but people need the ability to solve for A + B + ? = D.” Would you agree?

I’d actually take that one step further. A group of people in a discussion could all have slightly different versions of what we’re thinking about, and all be right. That can be difficult for people to get their heads around because we’ve grown up in a binary world where it’s yes or no, you’re wrong, I’m right, choose one or the other.

We need to understand it’s not that simple. From a tax perspective, we can all talk about something and have a slightly different interpretation of professional guidance, and how we should apply that guidance to the situation at hand. It’s not as simple as an equation with one answer; my view and your view can both be correct.

What do you primarily focus on in your course curriculum, and how has that changed given what we’ve talked about?

Auditing doesn’t change a whole bunch, but technology does change. Two years ago, Tableau was the flavor of the month. Now, we’re getting into Alteryx, UiPath, and Blue Prism, but fundamentally, the applications all attack the same problems.

My academic focus is how to build better thinkers and move students into a dynamic of asking better questions. Ironically, because I’m a technology person, how to use their brains more and technology less. For example, imagine I work at a company and cross paths with the CEO on the stairs, and she says to me, “Matt, I hear you’ve got a background in xyz. I’ve been thinking about xyz, and I’m wondering how our company might be impacted by it.” Well, now I have about 45 seconds to potentially navigate an opportunity to showcase my expertise. What I don’t have is time to pull out my phone or laptop and Google. I need to be in tune with what’s happening in my business without having the crutch of technology with me to do it. When you can’t do that, it’s what we refer to in the business world as a “career-limiting move”.

Now, no tax accountant knows every last bit of tax code and can recite it chapter and verse, no different than any auditor can recite all of the PCAOB Standards. So, for Tax, technology can accelerate necessary tasks and give me the ability to—instead of spending four hours plugging away on a keyboard—spend four hours getting deep into analyzing the data that will be relevant to the conversation my C-suite wants to have with me as a trusted advisor. Machines can do straightforward tasks, but for more subjective problems, we need people involved because people have different backgrounds and interpretations. So, it’s not as simple as just an equation.

What does the future look like for people with a traditional accounting background versus a technology background? Do they intersect?

Yes, that intersection is slowly becoming one sandbox both sets of people are playing in. Those worlds are converging more every year. When I did my graduate work back in the day, they were two completely different sandboxes, and you were forced to pick.

Accountants will have to be somewhat technologically aware. That doesn’t mean you’ll need to sit down and code or build infrastructure, but you’ll need enough insight to understand and participate in the conversation around technology. You’ll want to be someone people invite to the table because of the knowledge you possess holistically, not just because you’re very good at one thing.