Businesses have entered an era of perpetual flux, where global expansion presents both challenges and opportunities. Here, success depends on proactively navigating these changes to capitalize on opportunities. Understanding the various global tax regulations, as well as ensuring strict compliance, is critical to succeeding in global markets. With numerous tax types, thousands of jurisdictions, and frequent rate adjustments, businesses can develop diverse filing obligations. Neglecting these changes could have adverse consequences, particularly for companies wanting to expand overseas.
The same goes for Indian businesses who encounter regulatory barriers when exporting, such as customs declarations, product licenses, packaging requirements, export evidence, and invoices. In addition to this, cross-border trade necessitates extensive documentation that varies from one country to another and not adhering to this would lead to a huge tax notice slammed on their doors!
What also adds on to this is that owing to the evolving nature of tax regulations across the globe, which can change monthly too, CA’s/tax professionals catering to certain geographical locations struggle to comprehend and comply with all the laws and regulations of each country. To tackle these challenges, businesses are increasingly recognizing the advantages of automation - which allows companies to leverage their internal expertise and resources alongside technology's capabilities. Automated tax filing, including indirect tax filing, has become considerably simpler. However, the question remains: Does automation elevate businesses to a more significant role?
Indeed! With automation, less time is dedicated to tedious tasks like data entry or tax calculations, allowing more focus on rewarding aspects of the job. Businesses believe automating compliance will minimize human errors, elevate human capabilities, and compensate for hours lost to manual and repetitive work.
Here, specialized technology providers offer features such as automatically identifying restricted products, generating online customs declarations, calculating taxes, and promptly responding to new regulations. Automated tools provide swift access to real-time data, precise reports, analytics, and collaboration tools, aiding tax teams in navigating the evolving landscape of international tax regulations.
E-invoicing is another aspect that has gained significant global momentum, particularly post Europe’s PEPPOL (Pan-European Public Procurement On-Line) framework that standardized electronic invoicing processes across the region. This created a domino effect with more countries jumping on the bandwagon. These changes make partnering with right partners key to be able fully grasp international trade's tax implications and unlock new business opportunities.
As automation establishes its presence in tax, it is also taking the initial steps towards AI integration in tax compliance. While debates continue regarding AI replacing humans in various operational domains, its role in tax is seen as a complementary advantage. Mundane tasks are getting replaced, with AI empowering the tax authorities to analyze extensive datasets and identify anomalies indicative of non-compliance or fraud. This facilitates easier data access and interpretation, enabling CAs/tax professionals to make well-informed decisions. Moreover, AI can interface with tax automation solutions, streamlining processes and enhancing overall tax management.
Diverging from conventional AI, GenAI has also emerged as a disruptive force, distinguished by its user-friendly interface, diverse range of applications, and accessibility to large language models (LLMs). Infact, per a report by PwC, 57% of Indian CEOs believe technological innovations such as GenAI have significantly altered how their companies generate, deliver, and capture value, and the tax & compliance industry will be no exception.
Substantial progress has been made in cost reduction through implementing compliance automation since 2021, with outsourcing continuing to be a key driver. A notable 54% of companies globally leverage the expertise of specialized partners to access cutting-edge technology capabilities. In the Asia Pacific region, managed services outsourcing stands out as a significant strategy for cutting operational costs, with a 41% adoption rate, surpassing that of North America. Historically, Asian companies have maintained less centralized tax department structures. Yet, influenced by factors like country-by-country reporting, this dynamic is shifting. As a result, businesses are placing growing importance on outsourcing models to mirror the advantages seen by their global peers.
The future of tax is echoing technology, focusing primarily on ensuring that concepts of boundaries do not limit the expansion of Indian businesses. These businesses are currently addressing fragmented technology by seeking to consolidate various ERP systems and enhance structure and transparency in tax compliance. Parallel to this, integrated tax technologies are helping companies achieve high-quality, cost-effective compliance. Therefore, companies must deepen technology integration and continually assess their operational frameworks to balance in-house capabilities and outsourced technology optimally.