A new report shows that indirect tax professionals are proactively navigating rapid global regulatory changes and technological disruption, particularly through the adoption of AI and GenAI, to transform their work and drive organizational change
In today’s volatile business environment, indirect tax professionals — like their peers in many other industries — are navigating rapid-fire global regulatory changes while also facing significant technological disruption. In particular, AI and generative AI (GenAI) is expected to both transform how indirect tax work is performed and drive changes in job roles and organizational structures for indirect tax professionals.
For its recent report, Managing Change in Indirect Tax & Compliance, the Thomson Reuters Institute surveyed 206 indirect tax professionals in organizations in the United States, Canada, the United Kingdom, and Germany about the challenges they are facing, how they are addressing these challenges, the impact of new technologies (including AI), and how roles and responsibilities also are changing.
When evaluating the top measures of success, survey respondents cited accuracy of filings (with 89% of respondents citing this as a top measure), timely returns (83%), and minimizing the cost and resources required for compliance (65%) were most frequently mentioned measures. Notably, more than half of respondents (56%) cited automation of indirect tax processes as a key success measure, underscoring the growing importance of the drive to increase operational efficiency through technology.
This year’s survey also saw a shift in the top challenges facing indirect tax teams. Regulatory compliance has overtaken technology and automation, which was the leading concern last year. It’s not surprising. The regulatory environment is growing more complex and demanding, requiring adaptability on the part of indirect tax teams. While the adoption of technology remains critical, regulatory compliance is now the paramount focus, demanding both robust processes and agile, well-trained teams.
This places the industry in an interesting position as it prepares to deal with the sweeping changes that will result from the adoption of AI, potentially leading to another reshuffling of challenges and priorities in the near future.
Using technology to address challenges
The desire for greater use of technology is strong, the report shows. Increased use of technology and automation, including AI, was most frequently mentioned as the most desired future development. However, despite the appetite for greater automation and advanced technology, most organizations remain early in their adoption journey. Less than one in five indirect tax professionals surveyed (18%) said their organizations have fully deployed technology solutions. By contrast, more than half (61%) said their companies are either behind the curve or in the early stages of automating indirect tax functions.
Barriers to technology adoption are numerous, respondents noted. Budget constraints are the leading obstacle (cited by 63% of respondents whose organizations are not currently planning systems improvements), followed by resource limitations, lack of investment priority, legacy system incompatibility, and uncertainty around return on investment.
Interestingly, expectations for AI and GenAI adoption vary by geography. German respondents are the most optimistic about increased technology investment, while US indirect tax professionals are more cautious, possibly reflecting a higher baseline of existing AI adoption in the US market.
Shifting roles & training
As technology becomes more embedded in indirect tax processes, the function itself is undergoing a transformation, the report notes. Automation and AI are expected to relieve professionals of many repetitive, manual tasks, enabling a pivot toward higher-value activities such as strategic tax advisory functions, tax planning, and business insight generation. This evolution will result in more streamlined teams, with some roles consolidated, outsourced, or integrated into broader finance functions.
In-house tax function’s organizational structures also are changing as a result. Indirect tax is becoming more centralized and integrated into overall business operations, requiring greater cross-functional collaboration and alignment with corporate objectives. Indirect tax leaders are increasingly expected to partner with senior management, provide centralized reporting, and contribute to strategic decision-making.
As roles shift, job skill requirements will also change, and indirect tax leaders must decide whether to upskill their current talent or bring in new talent. More than half of respondents (58%) said they expect their organizations to invest in enhancing the knowledge and capabilities of their existing indirect tax professionals, far outpacing those who said their organizations plan to recruit new technology (28%) or tax expertise (23%).
Training within organizations is focused almost equally on technology and regulatory compliance, with a slight tilt in favor of regulatory knowledge, the survey shows. However, in the US, Canada, and the UK, fewer organizations are planning to provide technology training compared to last years’ report — a potential risk, given the increasing need companies face to move quickly on adopting fast-evolving AI technologies.
Given all these dynamics, the report describes how indirect tax functions would do well to focus on these areas:
Prioritize regulatory agility — Ensure that your teams have the tools, processes, and training to keep pace with regulatory changes across all jurisdictions in which your company operates.
Accelerate technology adoption — Evaluate your current stage of technology deployment and develop a clear roadmap for automation and AI integration, including training.
Invest in both technology & people — Prioritize upskilling existing staff, particularly in technology and regulatory domains, to maintain operational consistency and build resilient and adaptable teams.
Centralize & integrate — Move toward a more centralized indirect tax function that is closely aligned with the company’s overall business operations and strategy.
Foster cross-functional collaboration — Encourage partnerships between tax, finance, IT, and business units to ensure that indirect tax considerations are embedded in broader corporate decision-making.
As the report makes clear, corporations’ indirect tax function is at a crossroads. Regulatory complexity and technology disruption are reshaping the landscape, demanding new ways of working, new skills, and new organizational structures. Indirect tax professionals and leaders must embrace change, investing in both technology and talent and positioning the indirect tax function as a strategic partner within the business. Those functions that do so will unlock new efficiency gains, while positioning themselves to provide higher value and more strategic solutions for their organizations.
You can download the Thomson Reuters Institute’s recent report, “Managing Change in Indirect Tax & Compliance”, by filling out the form below:
