What’s Shaping the Indirect Tax and Finance Transformation Agenda?

Vertex surveyed 510 professionals with senior responsibility for indirect tax in their organization, about their experience and attitudes towards finance transformation.  

The new era of indirect tax and finance transformation

As businesses around the world set their sights on strategic growth and efficiency, tax and finance teams have entered a new era of transformation.  

Today, both teams find themselves tasked with supporting their organization in these strategic areas, taking new, digitally-enabled ways of working from being a ‘nice to have’ to a business imperative.  

To find out how far along on this tax digitalization journey finance and tax teams are on, Vertex surveyed professionals around the world, with respondents spanning the UK, Ireland, Nordics, Benelux, DACH and Southern Europe.  

Finance transformation was explored across a variety of businesses varying in industry and size

• 44% of the respondents worked within the finance and tax functions at small-to-medium-sized businesses (SMBs) bringing in between $20 million to $250 million in annual revenue. The other 56% were from larger enterprises, with revenues of $250.1 million and above.  
• Over half (52%) held a C-suite title or were the owner of their business; 28% were managers and 20% were directors/ VPs.  
• And when we look at top sectors, IT represented one fifth (21%) of those surveyed, followed by retail (13%), manufacturing (8%), education (6%), and energy (6%).

Respondents were asked about their views on tax and finance transformation, what their key drivers were, and how it benefitted (or challenged) them across key areas such as collaboration and career development.

Key statistics

Tax and finance transformation is complex, and this is the common thread throughout our research.  

We found that many businesses have multiple, intertwined transformation journeys in play, spanning digitalization, functional structure, and process change. Teams must think strategically about their goals, who they need to involve and how these different transformation threads coexist.  

Firstly, digitalization is commonplace across most businesses and their various functions, and finance and tax are no exception. The majority (53%) of our respondents have either been through, or are going through digital finance transformation, implementing new financial technology to digitize financial processes, reporting, and predictive forecasting. Many are also going through tax digitalization, implementing indirect tax technology such as tax engines and process management tools. Underpinning this, 36% are going through a broader IT or ERP system transformation.  

When looking at the key drivers, optimizing business growth emerged as the top motivation for tax transformation, with the majority (78%) of respondents prioritizing this.

Creating efficiency through consolidating functions was important for three-quarters (75%) of the respondents, and two in five (39%) cited internal inefficiencies as their reason for transformation.  
External factors also play a big role. Two in five (39%) said regulation and market conditions are key reasons for transformation, and from an indirect tax point of view, 77% said updating systems to stay on top of rules and rates was an important aspect of transformation.

Depending on organization size, there are some nuances in what has sparked the tax and finance transformation. For example, for larger enterprises, consolidating the tax and finance functions into one, or creating shared services, is seen as a key driver for four in five (80%), compared to 69% of SMEs.  

How is finance transformation impacting the tax function?

Underpinning any transformation project is a need for greater levels of collaboration. According to our research, some (but not all) finance and tax teams are embracing this collaboration.

When asked how involved the tax function is in finance transformation, almost a third (31%) of respondents said it is a collaborative effort between both teams, and over one fifth (22%) said tax was leading transformation efforts for the finance function.  

Once again, organization size appears to have a significant impact on transformation collaboration – with SMBs taking the lead.  

Ushering in new technologies to help manage, automate, or improve tax and finance processes is another essential component of transformation.  

Our research identified three key priorities for tax and finance teams:  

1. SAP S4/HANA and other cloud ERP systems: seen as crucial by 42% of respondents, and most popular amongst larger enterprises
2. Specialist platforms or indirect tax technology for tax determination and compliance such as tax engines: seen as crucial by 39% of respondents  
3. Robotics and AI: seen as crucial by two fifths (40%) of respondents

What does tax digitalization mean for tax teams?

Tax teams shared their main barriers to transformation with us, and as the report explores the most common pain points, it’s clear that there is work to be done to make transformation a success.  

The pressures and challenges of transformation (such as a need for new skills to fulfil the tax role post-transformation) has also caused some respondents to take specific actions such as career change or acceleration, and new roles in new organizations.  

Over half (53%) have considered using transformation as an opportunity to accelerate their career in tax, whereas the other half (48%) said they want to use it as an opportunity to change the focus of their role.  

Looking to the future, some new specialist roles are also growing in importance within finance and tax teams:

• The Technologist: This technology literate tax professional understands the tax digitalization processes for better accuracy, reporting and compliance. Highly important to the future of indirect tax for 74% of respondents.
• The educator: This tax professional has the data, knowledge, and time to advise and inform the business on tax matters, both at a board and department level. Highly important to the future of indirect tax for 74% of respondents.
• The Chameleon: This tax professional is equipped with the leadership skills to continue driving transformational change in both tax digitalization and tax function aspects. Highly important to the future of indirect tax for 74% of respondents.
• The AI Assistant: This AI tax assistant can not only handle many of today’s manual and repetitive tax tasks but can also learn to handle new ones amid changing rules and regulations. Highly important to the future of indirect tax for 65% of respondents.

Digitalization has opened up new opportunities for organizations, but it has also added complexity to indirect tax compliance. Discover how your team can overcome these challenges and stay prepared for the changing landscape.