We recently partnered with StudioID on a global survey of 150 finance leaders to reveal significant insights into how companies are navigating the increasingly complex world of indirect tax compliance. The research, which included CFOs, EVPs/SVPs/VPs of Finance, and Finance Directors from companies with revenues ranging from $500 million to over $5 billion, provides a comprehensive look at the strategies finance leaders are implementing to stay ahead of changing regulations.
Real-Time Reporting Becomes Essential
The survey found that an overwhelming 95% of finance executives believe ensuring accurate real-time data reporting is important or extremely important for improving tax and compliance operations. This shift reflects a fundamental change in how tax authorities operate globally.
Previously in indirect tax, the way that the government could enforce the law was always through periodic reporting, but it was an unsophisticated instrument. Now, continuous transaction controls have become very popular since it’s about sending data in real time to the government.
This transition means businesses are no longer simply reporting their subjective view of a period’s aggregate sales and purchasing numbers —tax authorities are increasingly gathering authenticated data in real-time and informing companies of their liability instead. The stakes are higher than ever, with non-compliance potentially halting business operations entirely rather than just resulting in penalties.
Navigating Complex Jurisdictions
The complexity of global tax compliance is staggering. Approximately 30% of both US-based and international companies surveyed sell products and services across 2,000 to 5,000 different tax jurisdictions. Each jurisdiction has its own rules, rates, and reporting requirements. Requirements are also increasingly dynamic, with laws and technical specifications evolving to reflect tax administrations’ fine-tuning operations at an ever-increasing rate.
With initiatives like VAT in the Digital Age (ViDA) and e-invoicing mandates rolling out across Europe and beyond, companies must stay ahead of regulatory changes. Encouragingly, 87% of finance executives report having systems and processes in place to anticipate these upcoming mandates.
Top Challenges in Implementation
When it comes to successfully implementing current and upcoming e-invoicing mandates, finance leaders identified two primary challenges:
- Staying informed about domestic and international compliance requirements (38%)
- Choosing the right platform that can seamlessly integrate with existing systems (49%)
Additionally, 56% of respondents mention difficulty in making business decisions due to limitations around tax and compliance data accessibility and accuracy.
Strategic Responses to Tax Complexity
Finance leaders are implementing several key strategies to improve their indirect tax and compliance operations:
- Training existing teams on tax technology (56%)
- Developing and maintaining tax technologists (51%)
- Hiring specialized talent (34%)
- Investing in fully automated solutions (61%)
These investments are paying off—76% of finance executives report seeing a positive return on investment from their tax compliance software. However, cost remains a significant concern, with 91% identifying “lowering or maintaining compliance costs” as a top priority.
The Problem of Point Solutions
One notable finding is that 73% of respondents believe their companies use too many point systems to meet tax obligations across different geographical locations. The median number of systems currently in use is 40, with most wanting to reduce this number significantly.
There seems to be a lot of confusion in the market, whereby a lot of businesses think they need to replace their business software with regulatory-driven software. This simply isn’t true as there are multiple ways that leaders can make existing business software compliant.
Looking Ahead
As tax authorities worldwide continue advancing their technology, making compliance more complex and demanding, finance leaders must balance compliance requirements with business objectives. The most successful approach integrates tax considerations into core business processes rather than treating them as separate functions.
The message is clear: while tax compliance is becoming more complex, the right strategies and technologies can transform this challenge into an opportunity for greater efficiency and intelligence about your business. Whatever you set as your business objectives, make sure that your compliance software works in such a way that the tax is never a burden.
By staying ahead of regulatory changes and investing in the right solutions, finance leaders can ensure their organizations not only remain compliant but thrive in an increasingly complex global tax landscape.
Want to learn more about how finance leaders are adapting to the changing indirect tax landscape? Download the full research report, “The Future of Indirect Tax: How Finance Leaders Are Staying Ahead of Changing Regulations” for comprehensive insights and strategic recommendations. Download Now
