Where Technology Modernization and Tax Automation Meet

Indirect tax leaders will want to take a close look at their organization’s technology modernization work this year. These typically IT-led efforts reduce “technical debt,” the burdens and costs of maintaining legacy systems. They also create a more adaptable environment for deploying advanced technologies such as AI, RPA, predictive analytics, and tax automation.

By getting a better feel for the drivers, challenges and priorities of technology modernization, tax leaders and their teams can proactively spot opportunities to leverage these efforts to upgrade and refine their tax technology stack.

A recent Protiviti report on the state of technology modernization contains plenty of actionable insights regarding tech modernization, including discussions related to:

• Drivers: Inflationary pressure and an uncertain global economic climate press companies to maximize value while minimizing risks. When technology modernization succeeds, it achieves both objectives by reducing IT maintenance costs and giving the organization access to new solutions that can drive business value.
• Current state: The report indicates that technology modernization initiatives have achieved mixed results in recent years, partly because those efforts were performed with insufficient  consideration of the time and expense these projects require. As a result, tech modernization projects now face stiffer funding competition from other business initiatives.
• The business case: Paving the way for the adoption and optimization of advanced technologies represents a pervasive driver of technology modernization investments. Other motivations include improvements to performance, reliability and scalability as well as reductions in IT maintenance efforts and costs. A lighter maintenance workload means that IT groups can invest more time in innovation. Regulatory compliance is another common driver of technology modernization. “The ROI from a technology-modernization program in the context of regulatory compliance can be significant,” according to the report. “By reducing the risk of noncompliance, organizations can avoid costly fines and legal actions. Moreover, modern systems can improve operational efficiency in compliance processes, leading to cost savings in the long run.” These benefits will resonate with indirect tax groups contending with e-invoicing mandates in the EU and elsewhere.
• Execution: The reduction of technical debt requires a range of approaches and actions. The report encourages readers to start by looking for opportunities to do so in their current systems – especially cloud-based applications: “Organizations should not overlook the opportunities offered by their existing infrastructure and cloud services,” the report notes. “By leveraging technologies already in place, businesses can reduce their risk levels and expedite their technology-modernization journey.”

Given the compliance, scalability and data management challenges many tax groups deal with, getting started on an ongoing modernization journey makes sense.