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Understanding the Importance of Technology Agility in Indirect Tax
Indirect tax is a hidden powerhouse within global enterprises, often representing over 10% of total revenue. This cash flow, particularly significant for companies with revenues around $1 billion—equaling approximately $100 million—works best when optimized for accuracy and compliance. However, when reliant on outdated systems and manual processes, the risk of financial penalties, audits, and inefficiencies rises sharply.
Emerging Trends: A Need for Transformation
According to the Thomson Reuters 2025 State of Corporate Tax Department report, a remarkable 94% of tax professionals express optimism about future tax technologies. Yet, despite the positive outlook, over half of respondents rate their departments as chaotic or reactive. For larger firms, this statistic improves significantly, with just 22% of smaller companies feeling they have made progress.
The Shift from Compliance to Strategy
As global regulations shift toward real-time reporting, the indirect tax function is evolving from a compliance-based system to a strategic partner within businesses. Organizations are beginning to view tax not merely as a cost but as a driver of business innovation and strategy. Leading companies have adopted technologies that automate repetitive tasks and eliminate silos, allowing tax functions to operate nimbly and efficiently.
Six Strategic Steps to Enhance Technology Agility
1. **Map the Value at Stake**: Understand the financial impact of indirect tax across various business entities and channels. By quantifying cash flows, organizations can link automation directly to risk reduction and working capital benefits.
2. **Invest in the Right Technology**: Embrace cloud-based indirect tax platforms that seamlessly integrate with ERP systems, reducing the manual handling of 95% of tax processes.
3. **Foster a Culture of Agility**: To counteract the slow pace of change, tax departments must develop an agile mindset, capable of adapting to the heightened scrutiny of regulators.
4. **Emphasize Data Usage**: Utilizing analytics and real-time data management equips tax professionals with insights that can inform strategic decisions, enhancing overall business performance.
5. **Integrate Across Functions**: A collaborative approach between tax, finance, IT, and operations ensures that tax considerations are woven into all aspects of business planning and execution.
6. **Upskill Teams**: Build a workforce proficient in both tax regulations and digital tools. As technology becomes a focal point in the strategic landscape, professionals equipped with the right tech skills will contribute more meaningfully.
The Road Ahead: Enhancing Collaboration and Proactivity
The future of indirect tax lies in achieving seamless cooperation between departments. Companies should actively dismantle silos to allow for an integrated approach that incorporates data-driven decision-making into strategic discussions. This proximity enables tax professionals to illuminate potential risks and identify opportunities far earlier in the business cycle.
Conclusion: Ready to Transform?
As the indirect tax landscape increasingly aligns with digital trends, organizations must take intentional steps towards transformation. The benefits of investing in technology agility will surface rapidly—leading to improved accuracy, reduced compliance risks, and enhanced business performance. Now is the time for tax professionals to advocate for the agility that will ensure they thrive in tomorrow’s business environment.
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