To remain competitive, companies must innovate and adapt to the changing indirect tax landscape. Corporate tax departments are increasingly using technology as a strategic partner to address these issues. A recent study from the Thomson Reuters Institute offers insight into how indirect tax departments are looking to use technology to transform their operations.
Accepting change through technology
The 2024 Challenges and Opportunities for Indirect Tax and Compliance report highlights the changes that indirect tax departments are undergoing as they move from pure compliance departments to strategic business partners. The state of the Corporate Tax Department in 2023 The study describes this change as a transition from a reactive to a proactive state.
Corporate tax departments are making these changes largely thanks to indirect tax technology. According to the survey, 58% of participants intend to improve their technological solutions for indirect tax compliance. This shows how sophisticated tools and systems are becoming increasingly necessary to manage the complexity of indirect taxes. The survey also found that 36% of businesses are considering starting or investing in a business technologies based on artificial intelligence (AI).. By using these technologies to support tax-related tasks that can be completed automatically, less manual work is required.
Take advantage of automation
The 2024 study provides a list of how indirect tax departments plan to use and invest in technology. The four main use cases and investments are:
- Tracking Regulatory Changes: Technology is used to track the ever-changing indirect tax rates and regulations in different regions and update the systems required for tax calculations. The survey shows that 58% of companies plan to change their technology to track these changes and update their systems. In contrast, 33% are considering introducing new solutions.
- Real-time reporting and compliance: Another way to consider technology in the indirect tax space is to respond to real-time reporting requirements. Many governments now require companies to report their indirect tax liabilities in real time. This can be a daunting task, but technology can help automate the process and make it easier for companies to comply with regulations. 56% of companies intend to modify existing technologies for this purpose and 29% aim to acquire new technologies.
- E‑commerce and digital customization: Tax departments are integrating e‑commerce and digital products into their operations using advanced technology. 49% of companies surveyed plan to adapt their current technology and 25% want to invest in new technologies.
- Responding to e‑Invoicing/Continuous Transaction Control (CTC) Models: As e‑Invoicing/Continuous Transaction Control (CTC) models become more prevalent worldwide, companies are increasingly looking for efficient and automated solutions to maintain compliance and avoid penalties. 35% of companies surveyed are updating their existing technology to address this issue. Conversely, 33% are investing in new technologies.
Most respondents reported that their companies prefer to improve or upgrade their existing systems rather than develop or purchase new ones. This preference is expressed at a ratio of two to one.
Anticipate changes and their impact on operations
Changes driven by technology will impact how indirect tax teams will work in the future. These changes will be discussed in the 2024 report. Here’s how these changes will affect your operations:
Shift towards strategic advisory functions
- From preparer to advisor: As automation takes over more and more routine tasks, tax professionals are moving from preparer to strategic advisor. This change will allow them to focus on strategic advice on governance, risk management, process design and business partnerships.
- Customer-facing roles: Tax professionals have more time to engage with internal stakeholders and provide insights and advice that can influence broader business strategies.
Increased efficiency and capacity
- Automation and AI: By automating routine tasks and By using AI, tax departments can increase their efficiency, Reduce manual work and increase capacity. This allows them to manage their operations more effectively and focus on higher value activities.
- Access to real-time information: An improved technology stack gives employees real-time access to tax-related information, enabling faster response to regulatory changes and compliance requirements.
Improved compliance and risk management
- Proactive compliance management: AI capabilities help predict and proactively detect compliance issues, enabling timely interventions and reducing the risk of non-compliance.
- Accuracy and timeliness: Advanced technology enables more accurate and timely filings, reducing the risk of penalties for late or inaccurate filings.
Global management and cross-country compliance
- Manage complexity: Tax departments will be better able to monitor cross-country compliance, ensure compliance with different regulations and support global business operations.
- Shared Service Centers: Many large companies use global shared services models to manage operations in different regions. This means tax professionals must manage complex tax requirements across multiple locations.
Data-driven decision making
- Advanced Analytics: The technology will enable advanced data analysis, enabling tax departments to make more informed decisions based on comprehensive and accurate tax data.
- Scenario planning features. Teams can better assess the tax consequences of strategic decisions such as mergers, acquisitions or expansions.
Further training and talent management
- Training and development: Investment in upskilling current staff Understanding regulatory changes and adopting the latest technology will be critical. This increases the technical competence of the tax team and improves overall efficiency.
- Recruiting technology expertise: To support the implementation and management of new systems, there will be an increased focus on recruiting individuals with strong technology backgrounds.
Cost management
- Reducing operational costs: Automation and improved efficiency help reduce operational costs associated with tax compliance. This will allow tax departments to reallocate resources to more strategic areas.
- Minimize IT support: Robust technology solutions can reduce reliance on IT support to manage tax technology and data requests, allowing this group to work on projects.
The report, “Challenges and Opportunities for Indirect Tax and Compliance,” shows that corporate tax departments are increasingly looking to technology to transform indirect tax operations. Key trends include automation, AI, real-time reporting and electronic invoicing. This shift improves compliance, efficiency and strategic advisory capabilities while reducing operational costs and optimizing resource allocation.
Challenges and changes in the area of indirect taxes and compliance
Based on a survey of 180 indirect tax professionals, this special report examines how upskilling and automation are becoming powerful allies.
Read the special report.
