Thomson Reuters annual Tax Technology Report also found 20% year-on-year growth in businesses investigating new technologies to address tax digitalisation
The Thomson Reuters 2019 Tax Technology Survey has highlighted that 76% of senior tax executives have seen an increase in attention on tax compliance and planning at the board level, primarily driven by Making Tax Digital (MTD) for VAT, the Government’s initiative for digitalising the UK’s tax system. The annual poll of tax professionals found that 98% plan to invest in tax technology over the next 12 months, compared with only 54% in 2018. Of that, 28% plan to increase spend significantly while the remainder expect spending to increase slightly (32%) or remain stable (38%).
The survey shows that the main driver behind the anticipated investment is the rise in digitally capable tax authorities. Almost half (45%) of respondents said that they had started or have plans to implement digital tax filing and compliance for new standards such as MTD and Standard Audit File for Tax (SAF-T), the international standard for the electronic exchange of reliable accounting data, as defined by the Organisation for Economic Co-operation and Development (OECD). Interestingly, the number of respondents saying that they are being asked to provide more detailed information to support filings has fallen from 52% in 2018 to 32% in 2019. This significant drop could indicate that some tax authorities, such as Poland, are well advanced in their SAF-T introduction and starting to see the level of detail they require coming through from corporate tax departments.
“There’s clear evidence from Poland and Spain that implementing new digital and near real-time reporting obligations yields significant return in tax revenue. It’s inevitable we will see more and more jurisdictions following suit in the coming years, and multi-national corporations need to be prepared to address these requirements with future-proofed technology solutions,” commented Steve Smith, Proposition Lead, Corporates at Thomson Reuters. “Furthermore, the report indicates that many tax departments are looking to centralise and manage compliance across multiple jurisdictions in response to the continued globalisation and digitalisation of tax.”
The challenges affecting tax professionals
Whereas GDPR impacted organisations in 2018, 23% of tax professionals reported that one of the key challenges facing their tax department for 2019 is Brexit. The need to keep up with new regulations and processes was also cited by respondents, with a 20% year-on-year increase to 36%. Furthermore, 30% of departments recognised the need for increased efficiency for internal processes and workflow, a 12% increase from 2018.
AI, Big Data Analytics, Blockchain and RPA hit the tax department
The results also show an appetite within tax departments to adopt in-house technology, rather than outsource, suggesting a desire to take control of digital tax transformation. In addition, the poll shows a year-on-year leap of 20% in the interest of new technologies to gain competitive advantage and stay ahead of tax authorities. Looking at the increases on the technologies being investigated, implemented or already live, specifically, Big Data Analytics is now up to 60%, Blockchain 39% (up from 16%), Artificial Intelligence (AI) and Machine Learning 50% and Robotic Process Automation (RPA) 56%.
“This interest in new technologies indicates that tax departments are recognising that the deployment of tax technology can help increase efficiencies, reduce human error and deliver a consistent and manageable way of addressing these new tax regulations. Compliance is in the midst of a revolution, and looking forward we can expect to see more regulatory attention to the process and governance rather than the end number. In a digital world the tax authorities will easily be able to validate the output. Tax teams need to prepare for this shift now,” further added Smith.
The 2019 survey polled 438 tax teams across a wide range of industries, including banking, manufacturing and services. Participants represented a cross-section of business – from companies with fewer than 1,000 employees to corporations with over 10,000. Thomson Reuters undertook the poll to assess key challenges faced by today’s tax professionals, including the current adoption rates of technology and their plans for the future.