The TMX's Eventful 2011
For the TMX, 2011 has been non-stop. A multitude of negotiations paired with a reviving economy and a strong loonie has been just a few of the challenges the TSX, its main product, has dealt with this year. Pushing forward through thick and thin, the TSX, although hindered in its merger with the LSE, will continue to thrive throughout 2011.
TSX and the LSE
In pursuit of a proposed merger with the LSE that fell through on June 29th, the TSX spent most of its year in negotiations with stockholders. Announced in February, the TSX hoped the merger would create an international exchange leader. With plans to be co-headquartered in London and Toronto, the combined exchanges would have become the number one venue in the world by a number of listings as well as number one in global listings venue for natural resources, mining, energy and clean technology. Additionally, the merger, stating the exchanges, was supposed to create a market leader in high-performance, cost effective cash and derivatives trading technology. The Boards of both LSEG and TMX, the TSX’s holding company, approved and recommended the proposal. Believing the merger to be strategically compelling, the Boards hoped to create a more diversified business that included a greater scale, scope, reach and efficiencies that would generate substantial benefits for the stakeholders.
When asked about the potential merger Wayne Fox, Chairman of TMX Group said, “Two highly successful and profitable institutions are joining forces to create a more diversified and international company. This merger of equals will benefit shareholders, issuers, customers, employees and other stakeholders of both organisations. As important, it will have a positive impact on the business communities in Canada, the UK and Italy. I look forward to working with my fellow directors and the combined team to create one of the world’s leading exchange groups.”
What Went Wrong? The TSX and the LSE cancelled their plan to merge in late June stating that they did not have enough support from TMX shareholders to complete the deal. At the shareholder vote on June 28th, there was a majority of support for the proposed merger, but it did not reach the two-thirds threshold that was required.
What were critics’ concerns? Partly, the fact that the LSE shareholders would have a 55 per cent stake in the new entity and that potentially the TSX would cede to the LSE was a big criticism of the proposed merger. This could threaten many financial services jobs that survive on the TSX. Additionally, the diminishing amount of board seats held by Canadians, that would have started at seven of 15 and later would diminish to three or four after four years, was cause for concern. Some speculated that the TSX would eventually become nothing more than an LSE branch office.
These concerns and more influenced the shareholder vote. As part of their proposal agreement, the LSE received a $10.3 million termination fee.
The TMX isn’t anywhere near defeated and seems to be making progress despite the termination of the merger. Continuing on its plans for 2011, the TMX is launching TMX Select™. An alternative equities trading system, TMX Select™ is Canada’s newest ATS that will offer participants “additional execution and liquidity seeking opportunities through a differentiated marketplace and pricing model.” With eight trading symbols enabled for trading at the start in July, the TMX Select™ offered the remainder of the TSX and TSX Venture Exchange symbols over the course of the month.
“Bringing TMX Select™ to market and introducing an innovative pricing model both reinforce our commitment to being the leader in the Canadian marketplace,” said Kevan Cowan, President, TSX Markets and Group Head of Equities.
Six issues at the top of tax and finance leaders’ agenda
New Deloitte research reveals that tax leaders are under increasing pressure to add strategic value as companies accelerate business model transformation, from undergoing digital transformations to rethinking their supply chains or investing in green initiatives.
According to Phil Mills, Deloitte Global Tax & Legal Leader, to “truly deliver value to the business, the tax function needs to rethink its resourcing model and transform its technology infrastructure to create capacity and control costs”.
And the good news, according to Mills, is that tax and business leaders have more options at their disposal to achieve this.
Reflecting the insights of global tax and finance executives at global companies, Deloitte’s Tax Operations in Focus study reveals the six issues at the top of tax and finance leaders’ agenda.
Trend 1: Businesses seek more strategic counsel from tax
Companies are being pushed to develop new digital products and distribution channels and accelerate sustainable transformation and this is taking them into uncharted tax territory. Tax leaders say their teams must have the resources and skills to give deeper advisory support on digital business models (65%), supply chain restructuring (49%) and sustainability (48%) over the next two years. This means redrawing the boundaries of what tax professionals focus on, and accelerating adoption of advanced technologies and lower-cost resourcing models to meet compliance requirements and free up time.
According to Joanne Walker, Group Tax Director, BT Group PLC, "There’s still a heavy compliance load today, but the vision for the future would be that much of that falls away, and tax people become subject matter experts who help program the machine, ensure quality control, and redirect their time to advisory activity.”
Trend 2: Tipping point for resourcing models
Business partnering demands in the tax department are on the rise, but 93% of tax leaders say their department’s budget is remaining flat or falling. To ensure that the tax function can redefine itself as a strategic function at the pace that is required, leaders are choosing to move increasing amounts of compliance and reporting to a combination of shared service centers, finance departments, and outsourcing providers that have invested in best-in-class technology.
Trend 3: Digital tax administration is moving faster than expected
in addition to the rising focus of the corporate tax department partnering with their business counterparts, transformative changes to the way companies share tax information with revenue authorities is also creating an imperative to modernize operations at a faster pace. Nine in 10 (92%) respondents say that shifting revenue authority demands on digital tax administration will have a moderate or high impact on tax operations and resources over the next five years—and several heads of tax said the trend is moving faster than expected.
"It’s really stepped up in the last couple of years," says Anna Elphick, VP Tax, Unilever. "Tax authorities don't just want a faster turnaround for compliance but access into a company’s systems. It's not unreasonable to think that in a much shorter time than we expect, compliance will be about companies reviewing a return that's been drafted by the tax authorities."
Trend 4: Data simplification and lower-cost resourcing are top priorities
Tax leaders said that simplifying data management (53%) and moving to lower-cost resourcing models (51%) must be prioritized if tax is to become more proactive at delivering strategic insights to the business. Many tax teams are ensuring that they have a seat at the table as ERP systems are overhauled, which is paying dividends: 56% of those that have introduced NextGen ERP systems are now highly effective at supporting the business with scenario-modeling insights. Only 35% of those with moderate to low use of NextGen ERP systems said the same.
At Stryker, “we automated the source P&L process for transfer pricing which took a huge burden off of the divisions," says David Furgason, Vice President Tax. "Then we created a transfer price database to deposit and retrieve data so we have limited impact on the divisions. We are moving to a single ERP platform which will help us make take the next step with robotics.”
Trend 5: Skillsets are shifting
Embedding a new data infrastructure and redesigning processes are critical for the future tax vision. Tax leaders are aligned — data skills (45%) and technology process experience (43%) are ‘must have’ skills in a tax department of the future, but more traditional tax specialist knowledge also remains key (40%). The trick to success will be in tax leaders facilitating the way these professionals, with their different backgrounds, can work together collectively to unlock lasting value.
Take Infineon Technologies, which formed a VAT technology and governance group "that has the right knowledge about how to change the system to ensure it generates the right reports", according to Matthias Schubert, Global Head of Tax. "Involving them early was key as we took a greenfield approach, so we could think about what the optimal processes would look like and how more intelligent systems could make an impact
Trend 6: 2020 brought productivity improvements
Improved productivity (50%) and accelerating shifts to remote working (48%) were cited as the biggest operational benefits to emerge from COVID-19-driven disruption. But, as 78% of leaders now plan to embed either hybrid or fully remote models in the tax function long term, 34% say maintaining productivity benefits is a top concern. And, as leaders think about building their talent pipeline and strengthening advisory skill sets, 47% say they must prioritize new approaches to talent recognition and career development over the next two years, while 36% say new processes for involving tax in business strategy decisions must be established.