He may be one of the only corporate tax professionals in the United States to hold a culinary degree from Le Cordon Bleu in Paris. If not, John Lee most certainly is the only one at Servco Pacific, where he serves as the company’s vice president and corporate tax director. As Hawaii’s largest privately held company, Servco is a global business with activities in automotive, consumer products, and investments.
Lee studied in Paris after earning his undergraduate degree from the Marshall School of Business at the University of Southern California. He returned there for his master’s in business taxation after he recognized the immense odds of launching a successful restaurant. However, he believes that much of what he learned in his culinary training directly applies to managing taxes for Servco’s global lines of business.
“Most people don’t realize how much organization and teamwork are required in a kitchen, where the demands change from moment to moment,” Lee explains. “The same is true in taxation, where these behaviors are essential in order to stay on top of constantly evolving laws and compliance requirements. It takes a lot of coordinated teamwork to manage all the necessary responsibilities of a corporate tax function.”
As a self-described perfectionist, he admits that learning how to delegate responsibility was one of the more difficult lessons he had to learn in his professional life. But mentors at his previous position at PwC helped him realize that no one has the time and deep skill set for every role. “It’s impossible for the executive chef to expedite and be at the sauté station at the same time,” he says.
Now, one of his major challenges in overseeing taxes for a global business is that considerations can vary considerably in different jurisdictions. Additionally, the activities of a local office can trigger significant tax implications for the entire parent company. To mitigate such risks, Lee prioritizes developing close working relationships with the company’s function leads. That has enabled him not only to fully understand the company’s business priorities, but also to provide opportunities to show how the tax department can deliver commercial benefits that further company objectives.
To illustrate that, Lee points to technology initiatives in several different Servco departments that qualify for research credits that can defray costs. “Taxes can seem so esoteric that some people simply don’t understand what our department does,” Lee explains. “If we know what’s important to them and explain how certain information we need supports their objectives, then they get a sense of why what we do is important for them.”
And that effort produces advantages for the tax department, as well. A deeper understanding of the business enables the tax team to reduce risks and align its activities with company priorities. For example, based on Servco’s lines of business and global footprint, Lee needed to apprise executives on the implications of provisions under the recent US tax reform legislation.
“Being able to explain what a particular law says is one thing, but you have to be able to explain what it means in the context of day-to-day operations,” Lee says. “That’s how you earn your credibility as a tax department.”
Lee and his team communicate regularly with operations and various company functions to stay abreast of current activities and future plans. That helps the tax department to proactively assess and mitigate potential risks, as well as advise on decisions that address both operational and tax concerns.
Staying Ahead of the Curve
There were several proposals leading up to the tax law, explains John Lee. For instance, there was a proposal to impose a “border adjustment tax” that in general would have made imports costlier for automotive and several other industries.
Before border adjustment was excluded from the final legislation, the tax function engaged in numerous discussions with operations to trigger internal thinking about business responses such as product lineup, pricing, and more. The tax law that was enacted included a new international tax regime that generally eliminates US federal income taxes on dividends from foreign subsidiaries, says John Lee.
“It also imposed additional limitations on the amount of interest expense that a US business can deduct,” Lee says. “These provisions have significant implications for the treasury function, and we in tax are more critical than ever to making decisions about whether and how to deploy foreign earnings, funding and borrowing, and more.”
To further help address tax requirements that are constantly evolving around the globe, Lee focuses on implementing technology and best practice tools, including the recent implementation of tax provision reporting and fixed assets tools. He will also roll out a workstream management solution in the near future to help administer critical processes and clearly delineate his team’s roles and responsibilities.
For example, the year-end tax provision process is a time-intensive activity with strict deadlines undertaken with fixed resources. The tax provision and workstream management solutions help define and assess the process and then allocate resources more efficiently and effectively. “In addition to streamlining the completion of tax deliverables, technology helps keep everyone motivated by improving transparency,” Lee says. “Having their responsibilities and contributions brought into sharper focus is a huge benefit.”
The tax department now has a suite of technology solutions in place. Lee expects that the automation they provide will reduce weeks off of several different tax processes. To date, the time saved has been applied to in-depth analysis of the various outputs. The applications will also increase overall accuracy by eliminating manual processing that was previously required for the same tasks.
Looking toward the future, Lee is keeping a close watch on the development of more stringent global compliance requirements. He points to the Organisation for Economic Co-operation and Development’s recent efforts to increase transparency and address perceived shortcomings in the international tax system. As a result, he says that there are already demands for greater transparency, even from private companies such as Servco.
In addition to leveraging technology and best practice tools, Lee believes that actively putting Servco’s core values of respect, service, teamwork, and continuous innovation into practice will serve the tax department and the company well. “The tax function has its own external and internal customers whom we want to serve at the highest levels possible,” Lee says. “To do that, we seek a full understanding of their priorities so we can innovate to meet their evolving demands.”
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