How Technology Will Transform Tax Handling in the Future

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How Technology Will Transform Tax Handling in the Future

CFO Tech Outlook | Thursday, June 10, 2021

While businesses have made significant progress toward digitising tax, they must continue to work to embed innovative technologies to earn stakeholder trust.

FREMONT, CA: While most tax managers recognise the importance of better-managed tax functions, they lack confidence in their ability to use technology to accomplish their goals. This is because they lack adequate positive feedback on tax innovation. This could be because there was a shortage of reliable technology-based tools for automating tax functions until a few years ago. In addition, they were prohibitively expensive for boards to budget. Finally, until recently, the scarcity of the appropriate skill sets and domain expertise in niche areas of tax technology acted as a dampener. The new digital tax function is rapidly evolving to become a strategic component of enterprise transformation, with tax executives balancing roles as a business adviser, intelligent technologist, and tax diplomat – bridging the gap to the C-suite and advocating for tax's unique value proposition in the digital age.

Taxation in the information technology sector: a threat and an opportunity

To begin, as a result of the dramatic acceleration of virtual work owing to the COVID 19 Pandemic, technology companies are already benefiting from new disruptive models of recruitment and human resourcing, such as bringing in fully assembled teams of specialists or bringing out new talent and capability to deliver work that will be managed and mainly delivered remotely. Post-pandemic, technology companies will continue to invest in hybrid resourcing models, which, while advantageous operationally, will inevitably result in increased risk and governance requirements for managing foreign worker taxation. Once again, this will focus on the back-office costs of operating a technology company and maintaining compliance. The second point concerns an opportunity rather than a threat. The 'new reality created by this radically altered working environment provides an opportunity for technology companies to optimise their tax functions.

It is undoubtedly the beginning of a race among various tech companies to harness the future of tax technology, resulting in greater security and lower cost.

Tax technology advancements

Finance and tax functions are primed for innovation and disruption, not just through increased use of AI, RPA, and machine learning, but with the increasing digitization of revenue-collecting authorities themselves. There's no doubt that automated services will dominate the day-to-day, repetitive compliance activities of tax and finance. Machines won't replace people; instead, they'll focus on tasks where human input is always likely to be valuable – creativity, insight, complex problem-solving, negotiation, persuasion, and critical thinking. While many fundamentals can be automated, practical skills and capabilities such as interpretation and leadership will always be required from tax and finance professionals.

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