To optimize your tax and finance functions, dig into your data

The disruptive impact of digital transformation shows no signs of slowing down or stopping, nor does the pace of regulatory change. Following are five ways that a modernized approach to data strategy and management can help tax functions be more efficient and effective.

With artificial intelligence (AI) and machine learning, tax can potentially automate more complex cognitive tasks, such as interpreting tax regulations, identifying compliance risks and managing tax considerations. AI models can also potentially predict tax liabilities, perform advanced tax scenario analysis and support strategic decision-making.

GenAI in particular is changing the way businesses think about tax and finance function transformation. Survey results reveal that 88% of respondents think that GenAI will help drive increased effectiveness and efficiencies within their tax function. Leveraging data and GenAI to drive innovation, insights, predictive analytics forecasting and automated reporting is a top priority. However, AI models can’t deliver on their promise unless specific data management requirements are met. Not surprisingly, a lack of accessible, high-quality and reliable data is a key barrier to using GenAI.

The pace of regulatory change shows no signs of slowing down or stopping, nor does the disruptive impact of digital transformation. Global minimum tax obligations, public tax transparency disclosures and digital tax filings are a current reality in a growing number of jurisdictions. The result? The need for more real-time calculations and audit support documentation than ever before, on timelines that are getting tighter than ever before.

When it comes to complying with base erosion and profit shifting (BEPS), which 74% of respondents said is a top priority, 42% anticipate struggling with source systems data required for reporting. Tax and finance operations leaders also expect a significant impact on their tax and finance function solution when jurisdictions roll out e-invoicing, but they lack a plan or a solution to address it. As of October 2024, approximately 24 countries mandate e-invoicing for value-added tax for all taxable domestic business-to-business (B2B) transactions, 50 countries require it for certain B2B transactions and roughly 15 additional countries have enacted plans to implement e-invoicing within the next 12 to 60 months (excluding ViDA). With tax personnel already spending nearly half of their time — 45% to be exact — on routine compliance activities, including data gathering and wrangling, teams are struggling to keep up with today’s demand — never mind prepare for tomorrow’s.

Ultimately, organizations will need to rely on the accuracy and integrity of their tax and finance data to find optimal outcomes. This is one reason why 63% rely on external service providers to consolidate data out of multiple ERP systems. Due to its inherent complexity and laborious nature, they simply cannot do it on their own. Organizations, such as the global EY organization, which is comprised of a network of member firms with local and international tax, tax compliance and tax technology professionals who can help you understand the complex rules and assess the potential impact of BEPS.

The deficit between young professionals entering the field and experienced ones retiring from it is only growing. Finding talent is so hard that for certain positions, companies also say they will consider nontraditional candidates, including individuals without college degrees.

More than half of respondents also say they are actively changing their operating models, and co-sourcing some activities was the most important change they’re considering. Co-sourcing provides access to professionals located globally who are skilled in the ever-changing tax landscape, along with a reliable workforce to take over routine tasks. This enables tax and finance leaders to focus talent strategies on new skills and more strategic activities, which 46% say is the biggest benefit of their co-sourcing arrangement. Just as importantly, co-sourcing partners can share insights and leading practices for designing a highly optimized hybrid talent model.

Additionally, with a modernized data strategy that leverages automation, analytics and AI, organizations are better positioned to attract professionals eager to work with innovative tools. By automating mundane and repetitive tasks (e.g., data entry, reconciliations, compliance), leaders can shift their teams’ focus to higher-value, strategic activities. This not only improves job satisfaction but also allows employees to use their expertise in more meaningful ways, which is a strong retention factor.