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Why Tax Practitioners Can't Afford to Ignore Tax Technology in 2024
- 17 October 2024
- Accounting
- Nestene Botha
As the tax landscape becomes increasingly complex, tax practitioners are facing new pressures to meet compliance standards, manage enormous amounts of data, and navigate real-time reporting demands. In this fast-changing environment, adopting tax technology is no longer optional—it’s essential for staying relevant and effective. By integrating the latest technological tools, tax professionals can streamline compliance, improve efficiency, and provide strategic insights to clients.
But why is tax technology so critical in 2024, and how can tax practitioners take advantage of these tools? In this article, we’ll explore the growing role of tax technology, key trends tax practitioners need to know, and why embracing these innovations is vital for staying competitive.
The Growing Complexity of Tax Compliance
One of the biggest challenges tax practitioners face is the increasing complexity of tax regulations, especially for those managing multinational clients. Governments worldwide are imposing more stringent compliance measures, including mandatory e-invoicing and real-time tax reporting requirements.
As Gino Dossche, EY Americas VAT Compliance Leader, notes, “It is crucial for organizations managing multiple entities in multiple jurisdictions to develop a broader multinational strategy... managing tax developments on a country-by-country basis is likely to become unsustainable and costly” (EY Americas, 2024). This shifting regulatory environment puts tax practitioners under pressure to adopt new technology to meet compliance demands efficiently.
Real-time reporting requirements, such as e-invoicing, are expanding globally. For example, countries like Brazil and Mexico have successfully implemented mandatory e-invoicing systems, ensuring transparency in transactions and reducing fraud (Thomson Reuters, 2023).
Tax technology tools are needed to handle these complex systems, allowing tax practitioners to automate reporting processes and maintain compliance.
The Role of Technology in Improving Efficiency
Technology enables tax practitioners to overcome the inefficiencies of manual processes. One significant trend is the rise of Robotic Process Automation (RPA), which automates repetitive tasks like tax return preparation, data entry, and reconciliation.
Leading firms like PwC are already implementing RPA to streamline back-office functions, resulting in significant time savings and improved accuracy. As PwC explains, “RPA has allowed tax departments to increase efficiency by automating mundane tasks, enabling teams to focus on more value-added advisory work” (PWC, 2024).
In addition to RPA, AI-powered tax software is revolutionizing tax research and compliance processes. AI helps analyze vast amounts of data, detect patterns, and highlight potential compliance risks, allowing tax practitioners to provide faster, more accurate strategic advice. The IRS, for example, is using AI to detect tax fraud and monitor large partnerships with over $10 billion in assets (Marcum, 2024).
Cybersecurity: A Growing Concern
With the increased use of digital tax solutions comes the need for robust cybersecurity measures. Tax technology involves handling sensitive client data, and any breach could have serious financial and reputational consequences.
A 2024 report from KPMG highlights the importance of embedding cybersecurity within tax functions: “With the deeper integration of data and technology, cybersecurity and data privacy are increasingly being embedded within the core business functions. The focus should not be solely on responding to threats, but on proactively ensuring cybersecurity across the organization” (KPMG, 2024).
Cybersecurity is particularly critical when using cloud-based solutions, which are becoming more popular for their scalability and real-time data access. tax practitioners must ensure that their platforms meet high standards for data encryption, access control, and regulatory compliance.
Key Trends Tax Practitioners Should Watch in 2024
The tax technology landscape is evolving rapidly, and staying ahead of the curve means understanding the key trends driving innovation. Some of the most transformative technologies tax practitioners should focus on include:
- E-Invoicing and Real-Time Reporting: Governments are increasingly adopting e-invoicing mandates to prevent fraud and improve tax collection. Across Europe and numerous countries globally, significant advancements in e-invoicing mandates are unfolding, with countries like Zambia and Saudi Arabia already on board (Billtrust, 2024).
- AI and Machine Learning: AI is transforming the way tax practitioners approach compliance and client services. It enables predictive analytics for tax planning, enhances risk assessment, and helps identify tax-saving opportunities in real time (Deloitte, 2024).
- Data Analytics: Big data is providing tax professionals with insights that allow for better scenario planning and more precise tax strategies. For instance, tax analytics tools help tax departments model the impact of regulatory changes or major business decisions, such as mergers and acquisitions, in real time (Kluwer, 2024).
Why Advisors Need to Get On Board
With so many tax technology options available, it can be overwhelming to know where to start. However, ignoring these trends will leave tax practitioners struggling to keep up with evolving regulations and competitors who are embracing innovation.
Adopting tax technology doesn’t just improve compliance and efficiency; it also positions tax practitioners as strategic partners to their clients. As Christina Bowers, EY's Global Tax Technology Leader, points out, “Analyzing, interpreting, and communicating the implications of data outside the tax department is becoming more important... the C-suite is expecting tax to play a greater role in organization-wide decisions” (EY, 2023).
For tax practitioners ready to embrace this new era, our upcoming webinar, "Tax Technology: Why Tax Practitioners Should Care," will dive deeper into these trends. You’ll learn about real-world use cases, get actionable insights on implementing technology in your practice, and understand how to get started with future-proofing your tax advisory services in 2024.
Conclusion
Tax technology is no longer a futuristic concept—it’s a necessity for staying competitive and compliant in 2024. As tax regulations grow more complex and digital tools become essential to meeting real-time reporting demands, tax practitioners must adapt. By embracing technology like AI, RPA, and e-invoicing, advisors can not only stay ahead but also provide more strategic value to their clients.
Don’t miss the chance to learn more at our upcoming webinar, where we’ll explore the most impactful tax tech trends and practical use cases, giving you the tools to get started on your tax technology journey.