Keeping Current with 2025’s Tax Compliance Trends

The year 2025 will be an important time for businesses that are navigating tax and compliance obligations across various industries and geographies. With the convergence of regulatory and technological changes, compliance is increasingly viewed as a critical organizational risk, moving beyond after-the-fact tax return filing to real-time reporting where governments have direct access to business data.

Keeping Current in 2025 – Governmental Oversight

To help companies stay on top of these important updates, Sovos released its 2025 Tax Compliance Trends report.

One of the most significant trends Sovos highlighted in the report is the intensifying enforcement dozens of different national governments are using to ensure tax compliance. With stricter penalties, including potential revocation of permits and licenses, organizations must keep pace.

A major driving force behind this shift is the government tidal wave of continuous transaction controls (CTCs), where tax authorities are integrating themselves into businesses’ accounts receivable (AR) and accounts payable (AP) systems, logistics processes, and general ledgers for more granular, real-time information. This creates complexities for multinational companies as each country has its own unique set of rules, necessitating technological solutions to ensure compliance across different geographies.

AI and Tax

Artificial intelligence (AI) is also playing an increasingly significant role in tax and compliance. Machine learning algorithms can analyze transaction patterns, identify anomalies, and generate alerts for compliance officers, enabling real-time monitoring and minimizing regulatory breaches. Also, generative AI offers the potential to streamline internal processes and empower finance leaders to focus on strategic business functions.

Organizations that integrate AI into their tax tech solutions can gain a competitive advantage. However, the effectiveness of AI depends on the quality of the data input, and businesses need to carefully evaluate their data, infrastructure, and system compatibility when implementing AI solutions.

Increasing Digitalization

Indirect tax digitization is another key trend in Sovos’ report. Governments worldwide are enhancing their monitoring and enforcement of indirect tax regulations, requiring businesses to adjust their approaches.

Sovos highlighted five key trends in this area:

1. Replacement of declarative reporting with source data – providing tax authorities with more granular and reliable information for prefilled returns and spot audits
2. Increasing data requirements – Governments are leveraging tax law for broader data collection, such as sustainability reporting.
3. Mandatory open networks – Governments are facilitating interoperability among business data exchange service providers and government platforms.
4. The impact on the enterprise software ecosystem – Certified brokers have become critical intermediaries, fostering alliances between business functionality software vendors and regulatory brokerage specialists.
5. Broader data opportunities – Centralized compliance data can be leveraged for business intelligence and analytics.

What This Means for ERP Insiders

Stay on the front foot. Businesses face a landscape of continuous change and growing complexity in tax and regulatory compliance. Addressing these challenges effectively requires a shift from disparate point solutions to centralized compliance platforms that offer the flexibility and scalability needed to navigate the evolving global regulatory environment.

Prepare for next year’s trends. While companies are already adjusting to the new normal, they must be aware that other changes are around the corner. For instance, governments are also actively seeking to replace declining revenues from traditional sources like fuel and tobacco taxes due to societal and technological changes. These new tax regimes often come with their own complexities and compliance requirements, so companies should be prepared.

Rely on expertise. Organizations will likely struggle to keep pace with the rate of change on their own. Finding a partner like Sovos to guide them through these changes will help them remain compliant with all applicable regulations, minimize tax burdens, and ensure streamlined operations.