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Tax Technology Spending Expected to Surge

Vertex Inc

When you enter the terms “AI” and “tax department,” your search engine will respond with a list of articles and reports on AI use cases and tax transformation. Those searches are on the mark: there are a growing number of tax AI uses, and AI can accelerate tax transformation. We’re seeing tax groups leverage AI to classify products and services to correct tax engine and commodity codes, perform real-time compliance monitoring, enhance tax data analytics, and interact with their tax technology stacks in conversational ways.

That said, there’s more to the tax-AI story. Indirect leaders who consider these narratives can help their teams derive more value from their investments in AI solutions and functionalities. 

The first story line relates to opportunity costs. While more tax groups are moving ahead with AI use cases, finance teams generally lag behind in deploying the technology as extensively as other departments, such as marketing, R&D, and computer engineering. 

Earlier this year, KPMG Principal Michael Sena and I co-presented a session on indirect tax trends and harnessing AI for compliance to a group of indirect tax leaders. While most of our talk dealt with generative AI use cases, the same insights hold for tax groups’ use of agentic AI. 

When we presented a list of AI-related questions for tax leaders to consider, Michael made a great point. He encouraged tax executives to evaluate the consequences of not investing in AI. What is the value of choosing to stick with the status quo vs. investing in an AI tool? Addressing that question requires an assessment of the value of the AI investment, both over the short-term and the longer term. Part of that value relates to the talent recruiting and retention benefits of operating a tax function with an advanced tax technology stack. 

Here are other AI questions we encouraged tax leaders and their teams to work through: 

  • Have you begun to think about how AI might impact your resource needs (e.g., numbers, skills, organization, etc.)?
  • Have you given any thought about how AI might enable tax to play a more value creating role (e.g., strategy and business decisions)?
  • How might generative AI impact your data strategy and related risk policies?
  • What are the benefits of embracing AI in your corporate tax department? 

AI governance is another crucial story line that tends to rate a bit lower on Internet searches. In our presentation, we emphasized the need to adhere to ethical AI principles such as fairness, privacy, safety, accountability, security, reliability, explainability, and integrity. An effective AI governance policy addresses each of those topics. 

When it comes to planning AI use cases, the following actions also help organizations cultivate a responsible approach to AI:

  • Focus on key specific outcomes when leveraging AI solutions
  • Identify low-risk opportunities to learn and develop insights to refine strategy
  • Integrate prompt experience with a unified experience strategy
  • Leverage AI as a resource augmentation to address current enterprise challenges
  • Create support structure and model training approaches
  • Develop controls that address ethical and bias-related concerns
  • Partner with strategic platform vendors to refine enterprise strategy, align with in-platform AI direction, and co-create innovation in this area

For additional insights on getting started with agentic AI, check out Chris’ follow-up post here and this KPMG report.

 

PLEASE REMEMBER THAT THE VERTEX BLOG PROVIDES INFORMATION FOR EDUCATIONAL PURPOSES, NOT SPECIFIC TAX OR LEGAL ADVICE. ALWAYS CONSULT A QUALIFIED TAX OR LEGAL ADVISOR BEFORE TAKING ANY ACTION BASED ON THIS INFORMATION. THE VIEWS AND OPINIONS EXPRESSED IN THE VERTEX BLOG ARE THOSE OF THE AUTHORS AND DO NOT NECESSARILY REFLECT THE OFFICIAL POLICY, POSITION, OR OPINION OF VERTEX INC. ⁠

Explore more resources from our industry influencers:

Michael J. Bernard, Chief Tax Officer – Transaction Tax at Vertex Inc. Vertex's Chief Tax Office (CTO) provides insight regarding the impact of tax regulations, policy, enforcement, and emerging technology trends on global tax department operations.

Michael J. Bernard

Chief Tax Officer, Transaction Tax

See All Resources by Michael

Michael Bernard is the Chief Tax Officer of Transaction Tax. In his role, he provides insight and thought leadership around tax department operations, U.S. indirect tax, tax risk management, and tax policy, as well as emerging tax trends. He is an executive-level tax attorney with a diverse portfolio of experience in corporate tax, administration, and finance, including a substantive knowledge of U.S. and international tax laws.

Prior to joining Vertex, Michael was in various tax leadership roles at Microsoft Corporation for 28 years, the most recent being Senior Director – Tax Counsel. Michael led teams in the following functional areas: direct and indirect tax controversy, sales and use, business license, property, tax IT, SOX, and telecommunications. He also co-led a corporate taxpayer advocacy group with the Washington Department of Revenue and was a Director on the Board of the Washington Research Council. Michael has also testified before administrative and lawmakers at both the federal and state level.

Michael earned both a J.D. and a Bachelor of Science in Business Administration from Creighton University. He is a part-time lecturer of Law in the LLM program at the University of Washington School of Law. Michael also served on the board of directors, executive committee, and chaired committees for The Tax Executives Institute (TEI) for nearly 25 years.

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