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Future of tax

06-06-2023
As technological, regulatory and societal shifts change the tax landscape, we ask: what is the future of tax?

In a tax landscape shaped by regulatory, technological and societal shifts, tax is becoming more data-driven and transparent than ever. This article explores the trends and developments that will lead us to the future of tax.

While it is often difficult to tell when a new era begins, it’s fair to say that the winds of change are blowing over the tax landscape. Shifts in the international tax system – driven in part by growing reporting requirements and new technologies – will shape the future of tax. But what exactly will it look like? While the future per se is difficult to predict, we can extrapolate current trends and developments to catch a glimpse of what might soon be reality. 

Renewed focus on data

Companies traditionally need to report their tax positions regularly (e.g. in their annual corporate tax returns or monthly VAT declaration) and make tax payments accordingly. Various countries around the world have already transitioned to some type of (near) real-time reporting, especially for indirect taxes or customs. As technology advances and the authorities’ interest in gathering as much data as possible grows, we expect this trend to accelerate for all type of taxes. In other words, real-time reporting will not just be for indirect taxes but also extend to transfer pricing or corporate tax information.

This new pace will leave companies with no, or significantly less, time to verify the figures and ensure that the correct amounts are reported to the tax authorities. With this in mind, companies will have to ensure that their ERP and reporting systems are set up to fulfill these requirements and safeguard data quality at the appropriate level. This will require investment in people, processes and technology – by taxpayers and tax authorities alike.

Where will the data trend end up? I see it culminating in almost complete transparency toward tax (and other) authorities, with near real-time monitoring possible. Such a scenario will impact the relationships between taxpayers and tax authorities as well. Companies will know that any changes, turmoil or other deviations from the norm within their organization will be visible to the tax authorities immediately. At the same time, full transparency on companies will trigger additional responsibilities on the part of the tax authorities toward those companies, and even society as a whole.

Andreas Wiesner

Director, Global Transfer Pricing Services

KPMG Switzerland

Better tax and business insights

There are two main implications arising from a situation where taxpayers have to provide more – and more detailed – data to tax authorities on a continuous basis:

  • First, tax functions will need to work together with finance and business teams to get the necessary additional data such as a more granular breakdown of profitability levels per product, service, etc. 
  • Second, such information will in turn create a larger data base, which may offer valuable new business insights. This will allow tax functions to become a more strategic business partner. This is indeed one of the ambitions that tax professionals often share in our global surveys. 

Personal AI tax advisor

Today, many tax professionals rely on their own knowledge, information available from public sources and advice provided by their trusted tax advisor. It takes a lot of research and analysis to keep track of all relevant tax law changes and assess the tax implications of internal reorganizations or other matters. 

Bill Gates recently shared his vision of a personal AI assistant, meaning that people may never again need to do an internet search themselves. This may be the future of tax as well. Tax professionals of the future could have personal AI tax advisors that answer all their relevant questions. Will that make tax advisory firms redundant? Not in my view. Rather, it will change the way tax advisory firms provide services. For example, they could become providers of personal AI tax advisors and be responsible for ensuring that the AI is trained, meets quality standards and is up to date (not restricted to the situation as of 2021 like ChatGPT). The AI tax advisor could become the interface between the client and the tax advisor, but it won’t replace the latter. 

Outlook

The above scenarios might describe the future in one form or another. It may come sooner. Or later. What is certain is that there will be change: from regulatory, technological and societal developments. Some elements cannot be influenced by an individual company, e.g. what you will have to report to authorities going forward. What taxpayers can influence, however, is how they respond to trends and shifts. How they establish the right infrastructure. And – most importantly – how they keep their teams engaged and motived to shape the future of tax.