By Hank Moonen, Chief Product Strategist – Global Tax Solutions, at Tax Systems
Tax legislation is becoming more interconnected, globalised, and complex, particularly with the introduction of the Pillar Two rules on global minimum taxation. As a result, many organisations are rethinking how tax is managed across their operations.
At its core, Pillar Two demands a level of accuracy and transparency that simply can’t be delivered through longstanding, siloed approaches to tax reporting. The new rules have focused attention squarely on the need for much better data integration and collaboration enterprise-wide. Finance and tax teams should start working closely together using shared data, following standardised processes, and having clearly defined responsibilities.
This is where a tax control framework can play a crucial role.
A catalyst for long overdue change
By bringing together people, processes, and technology under a common structure, it allows organisations to manage and streamline compliance obligations while also improving the overall quality of financial data. Better information consequently helps to strengthen risk management and unlock tax insights that support long-term strategic planning. As the foundation of Pillar Two is based on the consolidated financials and the tax accounting position in these financials, it offers the opportunity to manage taxes in the financial language a CFO understands.
In this sense, Pillar Two can be viewed as a catalyst not just for compliance, but for transforming tax into a more connected, value-added function within a business.
That said, putting a tax control framework in place isn’t something that happens overnight. Many businesses are still following tax processes that are fragmented, manual, and overly reliant on spreadsheets, email threads, and siloed data. It’s a way of working that could possibly be forgiven or left unnoticed in the past, but today, these poor processes expose organisations to direct financial risks. Inconsistencies, data duplication, and lack of a single source of truth all increase the likelihood of reporting errors, compliance failures, and poor decision-making.
Now, with Pillar Two pushing for a consistent, transparent, and globally aligned tax approach, these weaknesses are being brought to the fore. The new rules demand high-quality, consolidated data and traceable reporting across jurisdictions. Gone are the days where each country or office could operate in its own way. Tax departments must now be able to demonstrate an accurate, defendable global tax position that corresponds with real data from their financial systems.
As any control framework, a solid tax control framework should provide the necessary structure and discipline needed to manage tax risk across jurisdictions, and lay the groundwork for strategic alignment between tax, finance, and compliance teams. But for a framework to be truly effective in practice, it needs the support of three essential components: people, processes, and technology.
Driven by numbers, controlled by people
While tax is driven by numbers and data, it’s controlled by humans. Yet, cross-functional collaboration between tax and finance staff is often lacking. This must change. Everyone involved needs to clearly understand their role and responsibilities, and how their work fits into the broader picture.
A robust RACI (Responsible, Accountable, Consulted and Informed) model is a simple but powerful way to (re)define and document roles and responsibilities. For example, tax analysts and/or finance professionals might be responsible for pulling source data and ensuring its accuracy; the tax manager may be accountable for the final calculations; a tax advisor could be consulted for the explanation and interpretation of Pillar Two rules; and the CFO to be informed of status and possible material financial risks. Having a clear RACI model cuts out errors, confusion, improves communication, and helps avoid duplication or missed steps.
Establishing repeatable, reliable processes
Next, we move to processes. Once people know their roles and responsibilities, an organisation needs clearly documented, standardised procedures that outline how things get done. This includes workflows, milestones, review cycles, and escalation paths. Moving away from reactive, manual ways of working towards proactive, structured operations is key to reducing tax risk and improving efficiency. Embedding the RACI matrix into processes ensures that responsibilities are incorporated into appropriate workflows and nothing falls through the cracks.
These processes should span the entire corporate tax lifecycle from data collection and reconciliation to review, reporting, and submission. As Pillar Two evolves, it is likely to involve more complexity and tighter timelines. Therefore, repeatable, reliable processes are essential not only for filing next year’s returns but also for staying on top of any changes, whether external or internal.
Implementing a technology-enabled tax control framework
Lastly, we come to technology, the enabler that ties everything together. With the right tools, organisations can automate data crunching and routine tasks, and integrate tax controls directly into existing financial systems.
As Pillar Two aims to standardise income taxes across many jurisdictions, the selection of a standardised technology solution saves many months of implementation time, given the new and complex rules. By integrating modular cloud-based platforms, the gathering and consolidation of data from geographically dispersed teams and different systems becomes significantly easier. Instead of cutting and pasting information from spreadsheets, automation quickly maps data, eliminating manual errors and maximising efficiency.
Organisations can upload information once, verify it, and re-use it as needed, whether for their tax provision, Pillar Two, or any other requirements. With up to 60% of Pillar Two requirements coming from the tax provision, this can dramatically cut duplicated effort. It also ensures consistency and accuracy across the entire tax reporting cycle, including the automated production of GloBE Information Return (GIR) and local returns.
By deploying a tech-enabled tax control framework, organisations will be able to streamline their data flows via a single, integrated platform. Thus, reducing data overload and making it easier to concentrate on detecting potential inaccuracies or anomalies before information is presented to tax authorities. This is particularly beneficial in multi-jurisdictional environments where even small misalignments can be costly to identify and put right.
A lasting impact on financial and strategic planning
Importantly, extending tax control frameworks into broader financial operations has a deeper and longer lasting impact. It improves the overall reliability of financial reporting, helps eliminate data silos, and brings finance and tax teams closer together. This alignment is vital for more accurate forecasting, long-term planning, and gaining strategic advantage.
Moreover, a well-implemented tax control framework doesn’t just facilitate the production of accurate tax returns, it helps elevate the entire finance and tax function. It gives leadership assurance that tax positions are based on reliable data, avoiding unpleasant year-end surprises and creating a foundation for sustainable growth.
Scrutiny from regulators is only going to increase. But with a clearly defined control framework in place organisations can meet their compliance obligations for Pillar Two with confidence, as well as build a tax function that’s forward-thinking and can adapt to meet future regulatory requirements.
