The Case for Tax Technology Transformation: Insights from SAPinsider’s 2024 Study
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Key Takeaways
⇨ Investment in tax technology is increasing, with 63% of organizations planning to boost budgets to navigate regulatory complexities and support business growth.
⇨ Tax teams are embracing emerging technologies such as AI and machine learning, with 61% considering their use to enhance efficiency and decision-making within tax processes.
⇨ Despite budget increases, challenges such as integration issues and a lack of technical expertise hinder tax teams from fully leveraging technology investments.
As organizations face increasing regulatory complexity, shifting business models, and rapid technological advancements, the need for a modernized tax function has become more critical than ever. SAPinsider’s Tax Technology Innovation and Automation Benchmark Report revealed some key insights into how companies are transforming their tax function. This is the second year SAPinsider has been conducting this study
Rising Budgets, Growing Complexity
Encouragingly, investment in tax technology is on the rise. A majority of respondents (63%) report increasing budgets for tax technology innovation over the next two years, with 17% seeing significant increases. These investments are driven by the need to minimize tax risks, navigate increasingly complex regulations, and support business growth.
Increasing regulatory complexity, the push to reduce risks and errors, and the need for scalability are among the top drivers influencing tax technology investment. Data security and privacy regulations such as GDR and CCPA, E-invoicing mandates, and country-specific reforms are among the key regulatory changes that are influencing our respondents’ decisions.
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While tax projects typically take a back seat to transformation in revenue and product-oriented processes, the move to SAP S/4HANA presents a unique opportunity for tax teams to be in the innovation mix. According to our study 41% of respondents report having an enterprise transformation strategy that explicitly includes tax. The good news is that many tax teams are getting a seat at the table, but the majority are still struggling to be heard.
Benefits and Challenges to Investment
Increased efficiency and cost reduction are still the top two benefits expected from tax technology investments, say tax teams in our survey. These were the top responses in both years of our study. Tax is still being seen as a cost center, so resources are tight, and organizations are looking to technology to make the most out of what they have. Improved compliance and greater visibility for decision making are other objectives for investment.
Despite the increase in budgets for tax technology investments, more than half of tax teams in our research (54%) say that budget constraints are hindering their ability to leverage tax technology investments. Complex application landscapes are also raising integration challenges for 51% of our survey response. New technology and emerging regulations require new skillsets and one third of our survey responses (33%) say that a lack of technical expertise is impacting their ability to innovate.
Emerging Technologies and the Future of Tax
Tax teams are looking toward emerging technologies to help them transform their tax landscape. Artificial intelligence (AI) and machine learning (ML) are gaining traction, with 61% of respondents considering their use in tax processes. These technologies, often embedded in partner solutions, offer a cost-effective way to enhance efficiency and decision-making.
The SAP Business Technology Platform (BTP) is also becoming a critical tool for tax teams. Nearly half (47%) of respondents use SAP BTP for tax-related processes, and adoption is expected to grow as organizations seek solutions for integration, analytics, and custom applications.
In the end, the study is showing an increasing confidence as over two thirds (68%) of survey respondents assert that they are ready for the tax technology changes expected in the next 5 years. This is a 17% jump compared to last year’s results. The boost of confidence is the result of greater experience with both emerging technologies and this complex regulatory landscape.
What This Means for SAPinsiders
To stay ahead in the tax automation and innovation game, SAPinsider recommends that tax teams take the following actions:
- Demand your seat at the enterprise transformation table Tax teams must assert their role in SAP S/4HANA and ERP transformation initiatives. By aligning tax objectives with broader business goals, they can integrate their needs into key initiatives and investments.
- Get aggressive in leveraging AI and Analytics: Partner with vendors offering advanced AI and ML capabilities to streamline tax processes and enhance decision-making. These learnings will help you scale investments and prepare for continuous regulatory change.
- Make data management a priority: Implement robust master data strategies early in transformation projects so that you can ensure ongoing validity and quality of your tax data. This will provide necessary visibility for your stakeholders and support enterprise reporting initiatives.
- Invest in skills and training: As technology evolves, so must the skills of tax professionals. Prioritize training in cloud, ERP, analytics, AI, and SAP BTP technologies to enable successful implementation and adoption.
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