Pillar Two: The Confidence Gap

Imagine this.

The CFO asks: "Are we above the OECD minimum tax rate of 15%?"

Simple question. Then reality begins.

•  The accounting profit is in one system.
•  Tax data sits in ONESOURCE.
•  Some adjustments live in spreadsheets.
•  A few assumptions are in workpapers only one person understands.

And suddenly a "simple" Pillar Two calculation isn't so simple.

At first, the tax team isn't worried.

After all, the calculation itself looks straightforward.

•  Accounting Profit
•  GloBE Adjustments
•  Covered Taxes
•  Effective Tax Rate (ETR)
•  Top-Up Tax

Looks manageable. Then the emails start.

"Can someone confirm which Covered Tax file is the latest version?"

"Are we using the Q4 adjustment or the revised Q4 adjustment?"

"Who owns the Safe Harbour assessment for Ireland?"

"Which spreadsheet was used last quarter?"

If you've worked in Finance or Tax, you've probably lived some version of this story.

What started as a tax calculation has suddenly become a treasure hunt.

Not because the formula is difficult. Because the data is everywhere.

One of the biggest surprises for me while learning more about Pillar Two is that the challenge often isn't the tax logic.

It's the journey to get the data required to perform the calculation.

Finance owns some of it.

Tax owns some of it.

Local teams own some of it.

And spreadsheets seem to own the rest.

By the time all the pieces come together, the real question isn't:

"Can we calculate Pillar Two?"

It's:

"Can we trust the calculation?"

Because nobody wants to explain to a CFO, auditor, or regulator that the answer depends on which spreadsheet was opened.

And that's where Pillar Two becomes interesting.

The organisations that will do this well aren't necessarily the organisations with the smartest tax professionals.

They're the organisations that can answer questions like:

• Where did this number come from?
• Who approved it?
• What changed since last quarter?
• Can we reproduce this calculation six months from now?
• Can someone else run this process if a key person is on holiday?

In other words, governance starts mattering just as much as tax expertise.

I often compare it to building a house.

Everybody talks about the finished house. Very few people talk about the foundations.

Pillar Two reporting is the house. Data ownership, controls, workflows, approvals, audit trails, and repeatable calculations are the foundations.

If the foundations are weak, the reporting process will always feel painful regardless of how good the final report looks.

Which is why I keep coming back to the same conclusion:

Pillar Two is not primarily a reporting exercise.

It's a calculation, governance, and data management exercise.

The tax calculation may take minutes.

The effort required to gather, validate, review, and defend the data behind it can take considerably longer.

So the next time someone asks,

"Are we above the OECD minimum tax rate of 15%?"

Imagine having the answer in seconds.

Now imagine being able to trust it.

That's the difference between having data and having control.

And that's where the real Pillar Two journey begins.

 

 

Tax Transformation Starts Long Before Technology

A few months ago, when I joined a tax transformation assignment where the first workshop I witnessed quickly turned into a technology discussion.

Questions came thick and fast:

• Should we implement Oracle TRCS?
• Can OneSource handle this process?
• How will we support Pillar Two?
• What integrations will be required?
• Can Country-by-Country Reporting be automated?

All valid questions.

But after a few workshops, I noticed something interesting.

The technology wasn't the biggest challenge.

In fact, we were yet to agree on:

• who owned the tax provision process
• where tax adjustments should be maintained
• how deferred tax was calculated across jurisdictions
• which system was the source of truth
• what the future-state tax operating model should look like

At that point, it became clear that selecting a technology platform was not the first decision that needed to be made.

It was probably the last.

 

1)      Operating Model
The Question Behind Every Tax Transformation

Most tax transformation programmes begin with:

"Which system should we implement?"

In my experience, the better question is:

"How do we want our tax function to operate in the future?"

Until that question is answered, every technology discussion becomes speculative.

A modern tax operating model typically needs to support:

• Tax Provision
• Deferred Tax
• Tax Compliance
• Return-to-Accrual
• Country-by-Country Reporting
• Pillar Two
• Audit and Regulatory Reporting

The challenge is that many organisations have evolved these processes independently over several years.

As a result, the same activity may be performed differently across entities, jurisdictions and teams.

 

2)      Process
Technology Cannot Standardise What The Business Has Not Standardised

One of the most common observations I see is that organisations attempt to automate processes before they have agreed how those processes should work.

For example:

One jurisdiction may calculate capital allowance adjustments one way.

Another jurisdiction may calculate them differently.

A third jurisdiction may maintain the information in an entirely separate workbook.

The natural assumption is:

"The new technology will solve it."

In reality, technology often exposes inconsistency rather than resolving it.

Before automation comes standardisation.

Before standardisation comes process design.

 

3)      Data
Data Is Usually The Real Transformation Programme

Another lesson I've learned is that the most difficult tax discussions are rarely about technology.

They're about data.

Tax data often exists across:

• ERP platforms
• Consolidation systems
• Tax compliance solutions
• Local spreadsheets
• Regulatory reporting tools

Most organisations don't have a shortage of data.

They have a shortage of agreement.

Questions such as:

• What is the source of truth?
• Which balances belong to Finance?
• Which adjustments belong to Tax?
• How should accounts be mapped?
• Which data supports multiple reporting requirements?

can consume more time than system configuration itself.

A single ledger account may eventually support:

• Tax Provision
• Deferred Tax
• Tax Returns
• Country-by-Country Reporting
• Pillar Two

Designing that data model properly can significantly simplify future reporting requirements.

 

4)      Ownership
Ownership Is Often The Missing Piece

One of the most underrated aspects of tax transformation is ownership.

Technology can automate calculations.

Technology can automate workflows.

Technology can automate reporting.

What technology cannot do is decide who is accountable.

Questions such as:

• Who maintains tax rates?
• Who approves tax adjustments?
• Who reviews tax provisions?
• Who owns tax return reconciliation?
• Who signs off Country-by-Country Reporting?

are operational questions, not technology questions.

Yet they often determine whether a transformation succeeds.

 

5)      Technology
Where Technology Becomes Powerful

This doesn't mean technology isn't important.

Quite the opposite.

Once operating model, process, data and ownership have been established, technology becomes a powerful enabler.

Platforms such as Oracle TRCS, OneSource, SAP, FCCS, Longview and others can help organisations:

• automate calculations
• improve control and auditability
• reduce spreadsheet dependency
• improve reporting consistency
• support increasing regulatory requirements

But technology delivers the greatest value when it is supporting a clearly defined vision rather than attempting to create one.

 

My Biggest Takeaway

 

The most successful tax transformation programmes have something in common.

They spent time defining:

• Operating Model
• Process
• Data
• Ownership

before discussing system functionality.

Technology was still important.

It just wasn't where the transformation started.

Because ultimately:

Technology can automate a tax process.

It cannot define one.

And that's why I believe tax transformation starts long before technology.