Tax is on the cusp of a major transformation. Emerging technologies and innovation are driving forces behind the changes to the tax function.
In our fifth installment of the Better Finance podcast, we sat down with Jeff Saviano, EY’s global tax innovation leader, to discuss how emerging technologies and innovation are driving the evolution of tax functions globally.
The primary reason there is a great opportunity for technology to alter the tax function is because at its core, “tax is about data,” according to Saviano.
Emerging technologies such as blockchain and intelligent automation have the potential to completely disrupt numerous aspects of the tax life cycle — from how companies are managing their liabilities to how companies plan for the tax burden and how they report their obligation to the government, according to Saviano.
“I think it’s all fair game for disruption,” Saviano said.
In an effort to combat fraud and improve efficiency, governments are responding by heavily investing in software and technology to modernize their tax processes.
So what are the top factors disrupting the tax industry? One of them is fraud. And blockchain is one emerging technology widely being used to help combat fraud, Saviano said. With its distributed ledger, blockchain is able to establish trust across a network in which multiple parties are transacting with one another, providing “one version of the truth.”
Looking beyond blockchain and fraud prevention, Saviano also believes that the tax system will continually evolve to integrate digital assessments, while automation will change the face of the tax function.
Another top factor disrupting the tax industry is that governments are using digital tools such as e-audits and e-assessments. Several countries including Mexico, Brazil and Chile have already successfully implemented these digital technologies, and Saviano believes more countries will have the ability to adopt new digital technologies when it comes to e-assessments.
“In the future, instead of a corporation filing a tax return and estimating its own liability, the government will dictate what that liability is, and the burden of proof will shift to the taxpayer,” Saviano said.
The tax function, similar to any other corporate function, has a number of mundane and repeatable processes that are ripe for intelligent automation tools. These and other technologies are expected to change the profile of people working in tax departments.
However, it’s important to focus on the fact that these tools can serve to better enable the tax professionals of the future, according to Saviano. “I don’t think that we should be up at night thinking that the machines are coming,” he said.
Automation technologies are about how tax professionals of the future can utilize these tools to their advantage and be better at their job, according to Saviano. The tax talent in the future should have expertise that is a combination of core tax technical skills and data science skills to get the most of the advanced technologies.
In the past, those in the tax profession “didn’t feel as though that they needed to be technologists,” Saviano said. As we look forward at the future of tax, “I think all that is going to change,” he said.
For more information on innovation in tax, listen in to our conversation with Jeff at iTunes, Google Play and Stitcher or visit ey.com/betterfinance.