6 trends shaping the future of tax and accounting

December 13, 2022 11:51 AM

As digital transformation continues to accelerate the evolution of tax and accounting, the players who expedite their embrace of these six technology trends will have an early mover advantage. Particularly as the profession grapples with the continued war for talent, the firms that incorporate these trends into their business priorities will be best positioned to leverage each as an opportunity to drive growth, efficiency and resilience, while developing new, more innovative and agile ways of working.

Outsourcing lower-value work and leveraging predictive analytics

Global macroeconomic concerns are driving interest in outsourcing lower-value work and leveraging predictive analytics to mitigate market uncertainty.

As the global economy continues to grapple with ripple effects caused by the COVID-19 pandemic, and more recently the Ukrainian-Russian war, financial markets continue to experience volatility and uncertainty, fueled by fear of recession, the global labor shortage and inflation-related supply chain shifts.

With uncertainty in the commercial environment, finance offices will continue to seek technologies to help them quickly analyze available data and business intelligence to drive better supply chain analytics, mitigate and manage market volatility, and more accurately predict and create ways for people to buy, learn and work online. These trends will lead to an increased interest among tax and accounting firms in outsourcing tax preparation services to free up staff time to focus on higher-value work.

Accelerating the pursuit of cloud maturity.

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Companies across industries, including tax and accounting, will accelerate their pursuit of cloud maturity.

Before the COVID-19 pandemic, our client conversations focused on when they would move to the cloud, and on encouraging a sense of urgency in expediting their transition. Our more progressive clients understood the opportunities presented by cloud technology and were already prioritizing their transition. But many others were not so convinced.

The pandemic was a catalyst for technology and created a shift, making it clear to companies in virtually every industry, including tax and accounting, that if they want their organizations to have the flexibility and scalability to thrive, especially during times of disruption, they need to get to the cloud, and fast. So now, we're spending far less time educating clients about the benefits of moving to the cloud and spending more time advising clients on the most common cloud question we now receive: How fast can you get us there?

Global regulations will transform taxes, reporting and more

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The 15% global minimum tax and new global requirements related to ESG reporting will have a seismic impact on how companies calculate their taxes, and where offices of finance focus their time.

The European Union will require green energy and carbon footprint financial reporting in 2023, and the U.S. will require it by 2026. Big Four firm PricewaterhouseCoopers predicts this will be the largest change in global financial regulation since Sarbanes-Oxley, and Moody's has already announced it will be plotting ESG data for corporate ratings.

At the same time, offices of finance and T&A firms are grappling with new EU regulations around "open banking," also known as PSD2, and new taxation and audit standards around cryptocurrencies. And governments around the world — 136, to date — have also already agreed to adopt the 15% minimum corporate tax. These are all seismic changes that will bring a need for new reporting capabilities, a new set of corporate tax penalties to navigate, and a new standard for auditing. This is fundamentally changing how companies across the world calculate their corporate taxes and shifting where and how offices of finance focus their time.

Watch out for AI, RPA and quantum computing

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Artificial intelligence, robotic process automation and quantum computing will drive efficiency and smarter ways of working.

Gartner predicts that by 2025, the 10% of enterprises that adopt AI practices will experience as much as three times more value than the remaining 90% of companies that don't codify their approach to AI.

Wolters Kluwer's investments in technology innovation are proving this prediction to be true. For example, we launched an AVA Chatbot that handled 18.2% — 19,000 in total — of all customer support inquiries received during the 2022 tax season. In Europe, our cloud-based automated data entry tool uses AI and machine learning to process 6 million documents monthly, creating speed and accuracy for accountants while freeing up their time to focus on more high-value tasks. And that's just the beginning.

Today, all computation is linear. Quantum computing, which introduces simultaneous calculation capability, is on the verge of moving beyond the academic realm, into real-world settings, and will provide much faster computing capabilities to support the timely processing of enormous amounts of data. This technology will have a significant impact on our tax engines, enabling faster integration of complex tax changes, more robust tax analysis and better predictive modeling.

Partner ecosystems will get stronger

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Partner ecosystems will continue to be strengthened by greater connectivity, data interoperability, data standardization and more efficient electronic payments.

Application programming interfaces enable product interactions and extensions and often fill portfolio gaps. They're being used across industries to expand company footprints, address adjacencies, mitigate competitor advantages, and monitor opportunities. In the tax and accounting industry, customers want an improved, simplified experience. APIs provide speed, efficiency and access. All priorities for tax professionals.

Blockchain technology will also continue to reduce the costs of maintaining and reconciling ledgers, while giving absolute certainty over ownership and history of assets. Emerging technologies are already leveraging blockchain technology to create a certified audit trail showing proof of all interactions and identities of the involved parties. What used to take a day to complete, at minimum, can now be done in five minutes or less.

Web3 could be transformative

Longer term, the next evolution of the internet — often called Web3 — has the potential to transform all industries, including tax and accounting.

Web3 broadly encompasses the virtual reality user experience called the metaverse, as well as blockchain, a service-oriented architecture for rapid application development and secure transactions, high-speed 5G networking and web decentralization.

While there's little consensus on what exactly Web3 will look like, there is no doubt that it's a trend that's already taking shape. Decentralized ecosystems, enabled by blockchain, are already driving the next iteration of the internet as we know it. And we believe Web3 has the potential to be just as transformative for many industries, including tax and accounting, as the rapid adoption of the internet was in the late 1990s and early 2000s.

How will businesses navigate the metaverse? What new technologies will be created to further enable Web3 interoperability? And how will Web3 transform the tax and accounting industry? These are just a few of the questions we're beginning to explore, as we recently purchased our own virtual real estate in blockchain-based platforms Decentraland and Somnium Space, which we plan to use as an innovation sandbox to ideate and experiment with the potential of Web3 to transform the way our industry works.