5 megatrends in business process and tax digitalization

March 12, 2025 11:56 AM

Businesses are facing mounting regulatory requirements that fundamentally reshape tax and financial processes.

Governments around the world are leveraging technology and digital tools to gain real-time insights into economic activity, which is significantly transforming how businesses approach not just tax compliance and reporting, but also their tools and processes used in pursuit of business efficiency and competitiveness.

In this new era, businesses must adopt measures for comprehensive tax compliance and consider the design principle of "mirror visibility" with always-on tax administrations' insights without jeopardizing their freedom to deploy innovative solutions in core business areas. There are five key mega-trends driving this transformation that every executive in tax, finance and IT should fully understand.

The future of public policy lies in the transaction

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Governments are shifting their focus to the transactional level when it comes to tax compliance. This shift is being driven by the recognition that detailed, standardized data from live transactions is far more valuable and effective than declarative periodic reports coupled with on-site audits. Tax authorities worldwide are increasingly mandating real-time tax compliance, with requirements such as e-invoicing, e-reporting and continuous transaction controls becoming common across many jurisdictions.

In this environment, it's no longer enough for businesses to simply submit tax returns once a month, quarter or year. The future of tax reporting lies in structured, standardized and authenticated real-time data, tapping directly into the data interchange between trading partners. Tax authorities and other government agencies are applying powerful analytics to this wealth of transactional data, not only to monitor compliance but also to shape broader economic and social policies. This means businesses must treat transaction-level data as a critical asset, ensuring that it is both accurate and readily accessible.

Beyond the tax implications, this trend also brings opportunities for businesses to improve their operations. For example, by ensuring the same level of access to and insight into real-time data as the tax administration can provide valuable insights into customer behavior, cash flow and operational bottlenecks. By integrating these innovative ways of using the tax administration's desire to gain 360-degree insight into economic operations into their broader business strategies, organizations can gain a competitive edge, positioning themselves to make more informed, proactive decisions.

From fiscal codex to computer code

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Governments demand greater economic visibility through real-time data and are pushing for standardization. This drive for standardization is rooted in legislation designed to foster automation and reduce human intervention in core business processes. The goal is clear: minimize errors, combat fraud and limit corruption through the automation of regulatory compliance.

Businesses must think through the consequences of this shift on the way they approach compliance. While authoritative interpretation of law remains important as a component of a holistic compliance strategy, it is fundamental that budgets for compliance consider the evolution from declarative statements to objective observation by authorities by ensuring that appropriate resources are allocated to technology, data expertise and regulatory change management.

Empowering SMBs with open networks and improved data quality

Small and medium-sized businesses have historically often had to adapt to proprietary systems dictated by larger business partners. This has created barriers to seamless integration into digital ecosystems. As a result, SMBs are often "automation have-nots," doomed to use manual portals for communication with larger trading partners and email with smaller ones. However, a new wave of regulatory efforts is set to change this dynamic by pushing for standardized digital connections.

Governments across Europe, Asia and the United States are driving initiatives to create standardized digital connections, providing each individual business, regardless of size, with at least one access point to a global network-of-networks. These efforts aim to level the playing field for SMBs by making them independent actors on the network with the ability to design and implement appropriate levels of automation, where possible, directly from their core bookkeeping software.

This shift will have significant benefits not only for SMBs but also for regulators and enterprises. Standardized networks will enhance data quality by ensuring transactional data is structured and passes through professional service providers that can serve as data quality filters and automation multipliers. Regulators will be able to access accurate, high-quality data more easily, while businesses will over time see improvements in master data, which in turn will smoothen automated data exchange with trading partners.

Plumbing to meaning

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For many businesses, tax compliance has long been seen as an IT challenge — a series of back-end processes that need to be automated to reduce errors and ensure timely reporting. But as tax and compliance become more digital and integrated into core business operations, organizations are beginning to realize that transaction-level compliance is not just an IT issue; it's a strategic transformation with data in the star role.

By moving away from a reactive approach to addressing every new tax requirement at the lowest possible cost and by adopting a strategy that revolves around the impact on and of data — indeed, by shifting their focus in compliance from form to content (or, in technical terms, from syntax to semantics) — businesses can piggyback on the government's laser-focus on data to drive significant improvements in their own business intelligence.

One key design objective in this context is "mirror visibility" — to stay in control of one's data and one's destiny vis-à-vis public authorities, businesses should seek to maintain the same level of data aggregation, reconciliation and analytics as the government.

Beyond safeguarding one's ability to respond to prefilled tax returns and continuous inquiries about ongoing operations under the tax administration's surveillance, this approach allows companies to move from merely complying with regulations to gaining real value from their compliance activities. By leveraging the standardized, high-quality transactional data that is required for compliance purposes anyway, businesses can enhance business intelligence, optimize workflows and gain a competitive advantage.

Instead of treating legislative requirements as isolated, compliance-driven tasks, leading organizations are recognizing the broader strategic value of the data they are continuously sending to the government. For example, businesses can use transaction data for deeper business insights, such as operational efficiency and financial performance. This enables organizations to make data-driven decisions that improve overall performance, rather than simply meeting regulatory requirements.

For businesses to take full advantage of these opportunities, they must have centralized solutions in place that synchronize regulatory compliance with broader financial and operational goals. By aligning their tax and compliance efforts with overall business strategies, organizations can transform compliance into a valuable asset.

Embedding compliance into enterprise software ecosystems

One of the most significant changes on the horizon is the evolving coexistence of tax compliance and enterprise software. As tax administrations roll out programs to move away from the world of interpretation and declaration, actively pursuing a transformation toward a world where the law itself becomes computer code through mandatory specification of automated reporting processes, businesses must respond strategically. On one hand, technical specifications imposed by legislation create a simple compliance paradigm: use them or act illegally. On the other, by implementing every line of code into business processes without reflecting on the consequences can be catastrophic. Indeed, businesses may end up in a situation where they inadvertently allow government specifications — instead of business goals — to design their operational processes.

Intelligent strategies avoid such intrusion by adopting the principle of freedom of choice for business efficiency tools and processes, while making sure the solutions adopted by a business to achieve its own goals can always comply with law. This means businesses need to assess the impact of always-on tax requirements on all their systems and processes, and ensure for each of these that an appropriate compliance layer can be integrated so as to achieve the best of both worlds.

The challenge here is finding the right balance between flexibility and compliance. Businesses still need operational systems that can adapt to changing business needs, but they also need to ensure that these systems comply with a demanding regulatory environment.

The future lies in loosely coupled solutions that allow businesses to maintain their preferred operational systems while ensuring compliance with evolving tax, invoicing and audit regulations. These solutions must be flexible enough to accommodate changes in both business operations and regulatory requirements, without sacrificing one for the other.

Driving future success

The digitalization of tax and business processes presents both challenges and opportunities. While these trends may seem daunting, they represent a significant opportunity for businesses to improve efficiency, accuracy and strategic decision-making. Executives in tax, finance and IT must stay ahead of these trends by aligning their technology, processes and strategies with the emerging regulatory landscape. Those who embrace this transformation will not only stay compliant but also unlock new potential for business intelligence, operational excellence and competitive advantage. By proactively adopting these trends, businesses can position themselves for success in a more digital, compliance-driven world.