Exploring the opportunities of Generative AI in corporate tax: trends, benefits, and challenges

Exploring the opportunities of Generative AI in corporate tax: trends, benefits, and challenges

Digitalisation is already having a major impact on the way companies run their tax departments and meet new, and ongoing changes, to tax regulations globally. Generative AI offers huge opportunities to take this further and radically improve the way tax professionals work

Exploring the opportunities of Generative AI in corporate tax: trends, benefits, and challenges

Corporate tax departments traditionally relied heavily on manual and error-prone processes for tax administration and compliance. However, the emergence of new regulations mandating tax digitisation is driving change in this space.  

The 2022 European Commission’s proposed VAT in the Digital Age (ViDA) reforms that will require businesses to submit real-time transactional data to tax authorities, exemplify this shift. These reforms call for a complete overhaul of tax systems and a rethinking of the entire transaction compliance process. 

The dynamic nature of global tax laws, characterised by constant changes and variations, poses a continuous challenge for tax professionals in multinational corporations. Staying updated, managing administrative tasks, and controlling associated costs have been arduous tasks. To address these challenges, companies are actively exploring technologies that can introduce greater automation into their tax compliance processes. 

Many companies are eager to ensure their readiness for the digital mandates imposed by legislators. This drive has led to investments in technology within their tax departments, resulting in significant improvements in tax data collection and processing, better data accessibility, and the ability to provide real-time reporting. 

But what of the emergence of Generative AI and its potential to offer transformative value to the tax department?  

“Thomson Reuters’ Future of Professionals research shows that tax professionals are anticipating the benefits from AI. Improving internal efficiency tops the list of goals AI can help corporate tax departments achieve,” says Ray Grove, Head of Product, Transactional Compliance at Thomson Reuters. Who also points out that AI is not new to the world of tax, and it is already having a positive impact on the wider business.  

“Through the application of Generative AI, professionals have the potential to address human capital issues in the tax department,” he continues. “Since its inception, the tax profession has long been a deeply specialised and complex area to work in – even more so in corporate tax where there is added complexity and risk. AI has the potential to take on much of the mundane, time-consuming work currently being carried out by tax professionals. The impact of that? More time for corporate tax leaders to focus on the strategic value their departments can bring to big businesses.”  

Generative AI in corporate tax 

Incorporating Generative AI into corporate tax departments has several applications, including tax research, tax return filing, real-time data analysis, and predictive analytics for planning. “It empowers tax professionals to play a more significant role in safeguarding businesses during expansions, mergers, or acquisitions, as well as staying informed about new regulations and legislation” says Grove. “This shift enables tax professionals to focus on higher-level tasks and judgement calls, representing the real value that humans can bring to tax departments.” 

Generative AI also facilitates a forward-looking and predictive approach to tax, aligning with the increasing demand for real-time and transparent tax management, especially with new regulations such as e-invoicing. This technology transforms tax from being predominantly reflective, to offering predictive capabilities – a crucial requirement in the modern tax landscape. 

The future of the tax department 

The benefits of Generative AI in corporate tax departments include enhanced efficiency, time-saving, improved accuracy, and data-driven insights, adds Grove. “Many companies are looking at how they can access greater efficiency, and this is a long-standing priority. The obvious benefits Generative AI brings to tax are making workflows faster and better, enabling tax professionals more time for judgement calls and improving accuracy. It could also free up time for tax professionals to invest in strategic business partnering, to further support the business’s success.” 

Furthermore, Generative AI has the potential to reshape careers in tax, making them more appealing and rewarding. “It allows tax professionals to transition from taxologists to technologists, broadening the talent pool and attracting a diverse range of professionals. The tech-savvy nature of the younger generation aligns well with the evolving requirements of tax departments, leading to a blend of specialists and generalists in the field,” says Grove. 

Strategic investment in corporate tax 

From a strategic planning perspective, companies will need to put greater resources into their tax departments to ensure the success of Generative AI, and this includes budgets for training and staff development.   

“Tax departments have long been viewed as a cost centre, that has often been underfunded in the past,” explains Grove. “The organisations that will thrive in the future will be those focused on investing in people, processes and technology. If they are willing to make the investment, then they will get a return. There must be a purposeful effort made by the organisation,” he says, noting that many large organisations, which recognise the opportunities presented by Generative AI, are already making the needed investments. “They will lean into their providers and partners to see what they can achieve together.” 

Challenges of generative AI in tax 

While Generative AI presents numerous opportunities, it also poses challenges, particularly in terms of accuracy and data security. “Ensuring that accuracy is never compromised is paramount, and industry-wide alignment on accuracy standards is essential,” says Grove. Concerns about job losses due to automation exist, but the technology’s role is to remove time-consuming, low-value tasks, making tax careers more exciting and fulfilling offering tax professionals of tomorrow with more opportunities. 

Looking forward, further developments in Generative AI look set to further reshape the future of corporate tax departments. “There are a lot of developments that will bring in richer content and improve efficiency and accuracy,” concludes Grove. “When properly harnessed and risks mitigated, Generative AI will allow tax professionals to allocate more time to valuable, human tasks, leading to increased job satisfaction, productivity, and firm profits. Over time, generative AI has the potential to be a game changer for corporate tax departments – it’s a transformative lever for them to pull on.” 

 

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