The changing face of the tax function – and what it means for your team’s skillset

Tax leaders will be used to hearing that the tax function of the future will be very different to today’s. But how? And what will the changes mean for tax professionals’ skills profiles?

For an insight into the future, we should look at ‘super trends’ that will affect tax operations over the next 5-10 years. I believe there are two fundamental drivers of change in tax: tax authority digitalisation and technological advancement.

Let’s explore each of these, and their potential impact on tax functions.

As tax leaders know all too well, tax is going digital. Authorities around the world are moving from retrospective to real-time (or near-real-time) reporting. Prime examples include Brazil’s digital public bookkeeping system, and Hungary’s VAT regime, which now requires data submissions every few hours.

Other authorities will inevitably catch up, and the rate at which they expect submissions will only accelerate.

This digitalisation of tax compliance has a couple of possible implications:

• Tax in the ERP. The need to submit more data, more frequently, will drive tax compliance upstream within the organisation. Plus, as the pace of submission increases, tax processes will need to be carried out automatically, and in real time, within the corporate ERP system.
• Inhouse compliance. Ever more frequent data submissions may also prompt firms to bring tax compliance inhouse. There won’t be time to send data to an external partner, and wait for checks and corrections, before submitting it. Instead, they’ll need to run checks as close to tax events as possible – ideally as transactions happen – with only minor corrections made after the fact.

Digital technology has made transformative leaps over the past decade or so – in the form of the cloud, advanced analytics, automation and artificial intelligence (AI).

In particular, automation has streamlined tax compliance, freeing people up to focus on the advisory work that offers greater value to the wider business. And that’s where the very latest technological breakthrough – generative AI – comes in.

Gen AI can handle the routine queries that come in from the business to the tax team. That will leave advisory specialists to tackle the more complex queries, for which there’s no set answer or pre-existing content.

How exactly will digital tax and gen AI reshape tax functions and the skills tax professionals need? In my view, they’ll have a profound influence on four important aspects, which I’ll call ‘the 4 S’s’:

• Structure. We may see an increasing segmentation within tax functions between compliance and advisory roles. As compliance moves upstream, its activities will be more data-driven, while advisory teams will increasingly become technical specialists.
  
• Skillsets. As well as knowing the relevant tax rules, compliance teams will need to be able to process data in real time and use ERP systems. For their part, advisors must be adept at researching and solving the complex problems that gen AI can’t answer.
  
• Size. The assumption is that gen AI will replace jobs. But given the growing regulatory burden, tax functions are unlikely to shrink. Getting ready for real-time, digital compliance may even require more resources in the short term, though ultimately, technologies like gen AI will enable tax teams to do more with less.
  
• Simplicity. Real-time submissions will have the effect of simplifying the tax technology landscape for organisations. Integrating tax into the ERP system will require fewer (if any) bolt-ons to carry out tax processes.
  

Preparing for real-time, digital tax reporting can be a major undertaking. In the first instance, you’ll need to get a sense of where your function is currently, and what will be required to meet the demands of the future.

That process should begin by asking yourself the following questions:

• Is your team closely integrated enough with the rest of the business to enable real-time reporting? If not, then is your business partnering activity engaging the right stakeholders?
  
• Where do tax processes currently sit within your firm’s ERP system? Do they need to move upstream?
  
• What technology, resources and skills will you need to deliver real-time, digital tax compliance? Is your data ready?
  
• Should you be investing in gen-AI-powered tax solutions at this point – and again, is your data ready for them?

I’ll look at some of the skills tax professionals will need in the future, such as data analytics and AI prompt engineering, over a series of upcoming blogs.

In the meantime, get in touch to find out how the KPMG tax technology team can help you futureproof your function.

Our proprietary framework will help you to assess your team’s current digital skills; identify what’s required; and put in place structured learning paths to build the competences you’ll need. And our Digital Tax Academy provides a unique, tailored approach to training your tax professionals.