Digital Transformation is reshaping industries, yet the tax function often lags behind. Bruce Martin, CEO of Tax Systems, a leading provider of tax compliance software in the UK and Ireland, explore how integrating AI, automation and other new technologies can revolutionise tax operations and drive strategic business impact.
Digital Transformation – the process of adopting technology to significantly improve business processes and performance – is driving huge change across the economy. From increased efficiency, enhanced customer experience and improved decision-making, to data insights, greater scalability and innovation, its impact is growing every year.
For instance, many organisations are using software to streamline their processes to improve accuracy and productivity. At the same time, the integration of Artificial Intelligence (AI) and Machine Learning (ML) technologies to automate tasks as well as enable predictive analytics and help extract valuable insights from large datasets, is becoming more common.
In addition, the digitisation of traditional products and services is changing how organisations and consumers interact with the world. As a result, the global Digital Transformation sector was estimated to be worth over $730 billion last year, with further rapid growth predicted in the years ahead.
Tax transformation?
In the finance context, digital-led change is also having an increasing impact on the way organisations, teams and professionals operate. It’s interesting to note, however, that because tax is often viewed as a function of the wider finance operation, it isn’t always given the consideration it deserves when leaders plan their transformation strategies and investments.
The challenge this approach can create is that, even though the general complexity of the tax function means technology is usually more widely used compared to other finance functions, it is being left behind. In the rush to digitally transform, organisations are at risk of missing out on a range of opportunities to significantly improve the way they approach tax.
A big consideration driving this is that, unlike other areas of finance which have operational and revenue increasing priorities that can directly impact a business’ bottom line, tax is driven by regulatory compliance. This can mean that businesses are less willing to invest above and beyond what is necessary. Its status is somewhat analogous to the emphasis often given to Environmental, Social and Governance (ESG) planning and implementation, where organisations will implement change to a minimum standard until regulation prompts a greater sense of urgency.
The pace of digitalisation for tax teams can also be driven by factors like their specific position in the finance and tax lifecycle, and the experience and skill set of the tax team, including their influence on boardroom conversations about technology strategy and budget allocations for Digital Transformation priorities.
It’s not uncommon, for example, for CFOs with accounting backgrounds (as opposed to tax) to focus on the potential for transforming areas that align with their experience and role. The net result of these influencing factors is that tax is some way down the list of priorities and – in many organisations – less likely to see the benefits that Digital Transformation has to offer.
Companies could be losing out on a range of opportunities, including boosting efficiency and the levels of insight their teams can apply. Indeed, if the tax function is viewed as an exercise in compliance, it is unlikely that technology investment will be channelled towards anything resembling tax innovation.
Keeping pace with the speed of change
The question to ask here, of course, is what can be achieved given the right levels of emphasis and investment? Fundamentally, delivering tax transformation is all about empowering tax professionals to focus on adding value and making a bigger strategic impact.
Experienced professionals are being freed from the more mundane aspects of their work, so they can concentrate on areas more attuned to their years of experience and training. By applying automation to handle a range of manual and predictable tasks, tax professionals have more time to focus on areas such as improving efficiency and evaluating tax strategy. This is not only beneficial for them on a professional level but can also deliver a measurable impact on the business as a whole.
AI has huge potential to add value to the processes and capabilities of tax teams everywhere. And while it’s understandable that tax professionals may be reticent about how deeply AI will, or should be integrated, the emphasis should be on its potential to maximise productivity – not to replace jobs.
For any tax professional looking at the scope for applying the new breed of generative AI technologies to their processes, it remains vital to augment the use of these solutions with processes to detect and correct any errors as early as possible. As a result, the role of human specialists will remain essential to the integrity of accountancy processes for the foreseeable future.
The broader industry and government context is also driving the pace of tech-led change across the tax ecosystem. HMRC, for instance, is committed to accelerating the adoption of more sophisticated technologies in order to digitise tax at a fundamental level. As they deliver more changes, the industry will be forced to accommodate new ways of working, communicating and collaborating. Doing nothing simply won’t be an option.
A changing mindset for a digital future
Looking ahead, embracing Digital Transformation opens up a range of compelling opportunities to deliver process and business efficiencies. Success, however, depends on adopting a mindset where tax is no longer about box-ticking and compliance but a crucial business priority with the potential to impact the bottom line.
Implemented as part of an integrated and holistic Digital Transformation strategy, organisations now have the opportunity to blend human capabilities with new technologies in ways that simply have not been possible before. Those that act sooner rather than later will be in a better position to deliver on the benefits that transformation has to offer as the speed of innovation continues to accelerate.
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