Tax re­form as a peo­ple so­lu­tion Your turn: Tell us what you think

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Accounting Today - - Opinion - By Marna Ricker and Karyn Twaronite

The Tax Cuts and Jobs Act has gone from a hot topic of con­ver­sa­tion that closed out 2017 to an op­er­a­tional re­al­ity with wide­spread im­pli­ca­tions for how busi­nesses op­er­ate, in­vest, com­pete, and de­liver prod­ucts and ser­vices. And while cor­po­rate tax and fi­nance pro­fes­sion­als are grap­pling with the myr­iad de­tails around im­ple­ment­ing the new law, oth­ers in the or­ga­ni­za­tion are fac­ing a dif­fer­ent chal­lenge: mak­ing sure their al­lo­ca­tion of tax sav­ings will strate­gi­cally sup­port their busi­ness and their peo­ple, par­tic­u­larly over the long term.

We be­gan to con­sider the pos­si­bil­i­ties and set them in the con­text of a par­al­lel con­ver­sa­tion: What if com­pa­nies de­cided to put their tax sav­ings to­ward clos­ing the “op­por­tu­nity gap” — the dis­par­ity that arises due to a va­ri­ety of fac­tors, from gen­der, age and eth­nic­ity, to ed­u­ca­tion and train­ing, to ac­cess to men­tors and spon­sors? One of these op­por­tu­nity gaps is well known: On aver­age, women in the U.S. have to work more than 15 months to make what a man does in 12 months, ac­cord­ing to U.S. Cen­sus data. Could tax re­form ac­tu­ally help close that pay gap?

Pro­vid­ing equal op­por­tu­ni­ties across the board and pro­mot­ing fair prac­tices across all di­ver­sity di­men­sions is not a “feel-good” ex­er­cise — it’s a busi­ness im­per­a­tive.

To get a bet­ter un­der­stand­ing of how busi­nesses across a va­ri­ety of in­dus­tries are in­vest­ing their tax sav­ings, Ernst & Young LLP con­ducted the “Tax Re­form Dol­lar De­ploy­ment Sur­vey,” pos­ing a range of ques­tions to 500 C-suite ex­ec­u­tives in the U.S. from com­pa­nies with $500 mil­lion or more in rev­enue. Their re­sponses in­di­cate that some busi­nesses are think­ing about in­vest­ing some of their tax re­form sav­ings in their peo­ple, and this could sig­nal a pos­i­tive im­pact on op­por­tu­nity, gen­der or pay gaps.

To start with, the re­sponses in­di­cated that 81 per­cent of com­pa­nies are aware of gen­der or racial pay gaps and 69 per­cent have plans to ad­dress them — both en­cour­ag­ing sta­tis­tics. A large ma­jor­ity of re­spon­dents (89 per­cent) plan to en­hance com­pen­sa­tion, with 41 per­cent in­creas­ing salaries across the or­ga­ni­za­tion and 35 per­cent fo­cus­ing on in­creas­ing their min­i­mum wage. Al­most a quar­ter say they’ll be ded­i­cat­ing 10 per­cent or more of their tax sav­ings dol­lars to com­pen­sa­tion, with the aver­age spend of 8 per­cent.

The news was even bet­ter when look­ing at some of the other planned in­vest­ments ear­marked for tax re­form sav­ings, im­ply­ing long-term sup­port for a more ef­fec­tive work­force. For ex­am­ple, 41 per­cent plan to in­vest in work­force de­vel­op­ment and train­ing — ar­guably one of the most strate­gic ap­proaches to sus­tain­able suc­cess via reskilling and up­skilling for the new work­force model. Over a quar­ter of re­spon­dents plan to pro­vide their work­force with stu­dent loan debt as­sis­tance and 45 per­cent will en­hance such ben­e­fits as health care or fam­ily leave. Op­por­tu­nity gets a boost as well, with 28 per­cent of re­spon­dents re­port­ing that they plan to cre­ate more jobs.

The world con­tin­ues to change as a re­sult of de­vel­op­ments in glob­al­iza­tion, de­mo­graph­ics, tech­nol­ogy and reg­u­la­tion. These dis­rup­tive forces re­quire or­ga­ni­za­tions to change rapidly — and they need all their peo­ple to be ag­ile and adapt­able to that change. This trend is a crit­i­cal el­e­ment of suc­cess for com­pany in­no­va­tion and growth, and may ex­plain why so much of the new­found cash will be in­vested in train­ing and job cre­ation.

Pro­vid­ing equal op­por­tu­ni­ties across the board and pro­mot­ing fair prac­tices across all di­ver­sity di­men­sions is not a “feel-good” ex­er­cise — it’s a busi­ness im­per­a­tive. If the new tax rates and poli­cies en­cour­age and en­able that ap­proach, all the bet­ter. And even for firms like ours — part­ner­ships for which the lower tax rates don’t ap­ply — it’s vi­tal to make sure we’re all do­ing our part to close the gaps.

We ap­plaud ev­ery or­ga­ni­za­tion that makes a con­certed ef­fort — with or with­out tax ben­e­fits — to sup­port eq­ui­table op­por­tu­nity, ex­pe­ri­ences and re­wards that will help all their work­ers stay en­gaged in their ca­reers and con­trib­ute their full value to the com­pa­nies that em­ploy them in the com­mu­ni­ties where they live and work. The col­lec­tive po­ten­tial of all these plans raises hope for a peo­ple so­lu­tion with a last­ing ef­fect.

AT

Marna Ricker is Amer­i­cas vice chair of tax ser­vices, and Karyn Twaronite is global di­ver­sity and in­clu­sive­ness of­fi­cer, at Big Four firm EY. The views ex­pressed are those of the au­thors and do not nec­es­sar­ily rep­re­sent the views of Ernst & Young LLP or any other mem­ber firm of the global Ernst & Young or­ga­ni­za­tion.

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