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Published: April 11, 2024
Updated: April 11, 2024
The traditional role of tax leaders has been evolving for several years. Today, CFOs are increasingly looking to tax leaders to provide greater value to the business. Organizations recognize the critical importance of the tax function across their commercial activities and are expanding their responsibilities and inviting tax department input on strategic business decisions.
Tax leaders are recognizing the immense potential of technology such as automation, data analytics, and artificial intelligence (AI) to enhance the tax function. BDO's Global Tax Outlook Survey identified upgrading tax technology capabilities as the top priority in 2024 across all regions surveyed. When integrated appropriately, these tools can increase productivity by automating repetitive tasks, improving data accuracy, providing real-time tax insights, enabling departments to focus on their strategic roles, and driving significant value for organizations.
While the benefits are compelling, it is crucial to acknowledge the challenges that tax leaders may face during the adoption and integration of these advancements. Data privacy concerns, upskilling talent, and ensuring accuracy are a few of the obstacles that tax leaders must navigate on the path to technological integration.
The distinct roles of data analytics, automation, and AI in tax processes
Data analytics, automation, and AI each play a unique role in improving tax processes. These terms are often used interchangeably but have distinct meanings:
How technology is enhancing the tax function
Certain tax functions, especially compliance tasks, are well-suited for automation. Tax departments are often inundated with large amounts of data from various sources, which requires time and effort to sort through. Compliance tasks, such as processing tax returns for individuals, corporations, trusts, or partnerships, involve repetitive components that can be more easily automated.
By deploying automated data entry, valuable time previously spent on these low-level tasks is freed up. This newfound efficiency allows tax professionals to shift their attention to higher-level strategic tasks, nurturing innovation, and fostering more meaningful interactions with clients.
Additionally, data analytics used alongside AI-powered tools allow tax professionals to unearth insights that were previously inaccessible without extensive manual review. By educating and reskilling talent, we can equip them with advanced analytical skills that allow us to confidently interpret and communicate the stories that the data is revealing. While automation streamlines repetitive tasks, the integration of data analytics and AI elevates the quality of tax analysis and advice, ultimately leading to better outcomes for clients.
It's an exciting time to be in the tax industry, as we embrace the potential of technology to shape a future of innovation and excellence.
“By harnessing the power of these tools, we can streamline compliance tasks, dive deep into data analytics, and ultimately provide enhanced value to our clients,” says Dustin Mansfield, Partner, Tax Compliance Leader. “It's an exciting time to be in the tax industry, as we embrace the potential of technology to shape a future of innovation and excellence.”
Let's be clear. These technologies are not a replacement for the knowledge and skill of tax professionals. They serve as powerful allies, helping to either better serve clients, or allowing for more time spent on strategy and innovation. Tax professionals equipped with cutting-edge technology are poised to reshape the industry by making it more efficient and effective.
Challenges implementing new technology
27% of respondents surveyed for BDO's 2023 Global Tax Outlook reported that the adoption and effective use of new technology, tools, and techniques is likely to be their top challenge in 2024. Tax leaders can expect to navigate several challenges when implementing new technologies like AI, automation, and data analytics including:
Protecting sensitive data is paramount in the tax industry. Tax professionals handle vast amounts of personal and financial information, including names, addresses, and social security numbers. With the adoption of technology comes the increased risk of cyber threats and data breaches.
Tax leaders must prioritize robust cybersecurity measures, striving to maintain systems that are both secure and compliant with evolving regulations. Organizations should establish and enforce strict policies regarding data handling and access to minimize vulnerabilities. For example, determining the type of information permissible for input into third-party platforms like ChatGPT. While technology offers efficiency and innovation, it also demands heightened vigilance in safeguarding against cyber threats.
Tax functions are grappling with the need to embrace innovative technologies as well as ensuring their teams can acquire the skills to meet the extended demands being placed upon them. The evolving landscape will require knowledge in areas such as data engineering, AI integration, and software development. Tax leaders must invest in comprehensive training programs and provide opportunities for continuous learning to equip their teams with the necessary skills. In fact, almost half (47%) of tax leaders surveyed for BDO's 2023 Global Tax Outlook report that they plan to ‘implement training to upskill current employees’ to more successfully adopt tax technologies.
Conferences, workshops, and educational resources can facilitate knowledge transfer and skill development. Moreover, organizations must prioritize technology proficiency from the top-down, with CEOs and senior leadership setting the tone for a culture of innovation and learning.
"To upskill talent, one of the key opportunities lies in prompt engineering. It's about crafting queries and prompts in a way that elicits accurate responses from AI systems," explains Harry Chana, International and Cross-border Tax Services Leader. "With practice and training, professionals can refine their prompt engineering skills, ensuring that AI yields the desired outcomes and therefore improving productivity."
By prioritizing technology education and talent acquisition, tax leaders can bridge the skills gap and harness the full potential of technological advancements in the tax function.
Ensuring the accuracy of information provided by AI and automation presents a critical challenge for tax leaders. Experienced tax professionals bring years of knowledge to the table, allowing them to discern the accuracy of AI-generated responses. However, the challenge lies in equipping the talent of the future with the skills necessary to evaluate and validate AI responses and automated outputs effectively.
AI and automation should complement, not replace, human expertise. Encouraging a mindset of continuous learning and critical thinking will empower teams to confidently assess the accuracy of AI-generated responses and ensure the delivery of high-quality information.
How BDO Canada is embracing AI
BDO Canada is fully embracing the transformative potential of technology, with a particular focus on AI-powered technology.
As part of our strategic relationship with Microsoft, we were given early access to Microsoft Copilot. Microsoft Copilot combines the power of large language models with the data in Microsoft 365 apps— all in the flow of work—turning words into a powerful productivity tool. Microsoft Copilot provides real-time intelligent assistance, it can summarize long email threads and provide suggested replies in Outlook. In Teams, Copilot can summarize key discussion points, who said what, where people are aligned, and suggest action items.
AI has firmly established its presence and is becoming an integral component of today’s business environment. It’s crucial that we adapt to and embrace this technology.
By deploying these AI solutions, we can achieve greater efficiency across the entire firm, empowering our employees to enhance and improve the quality of their output. With the support of these tools, we can fully focus on building stronger relationships with our clients, leading to improved client service and the delivery of even greater value in the process.
"AI is here and available—we cannot hide from it. We must learn how to harness its power to use it safely and responsibly. It’s important for BDO to embrace it to gain a better understanding of how we shape policies and uses around it."
Our team has long recognized the transformative potential of AI for both our firm and for our clients. Our firm's achievements in AI have been recognized, with BDO Canada being awarded the 2023 Microsoft Canada AI Impact Award. The award recognizes BDO’s efforts to deliver impactful innovation in client scenarios using Microsoft Azure OpenAI Services. These solutions enhance the firm's ability to build custom and effective solutions for Canadian businesses.
Driving value and industry transformation
Embracing technology and innovation is crucial for tax leaders to drive organizational transformation and meet the evolving expectations of their roles. Failure to do so could mean getting left behind by competitors who fully embrace these advancements. However, adopting these technologies will come with its challenges. By prioritizing security, fostering a culture of innovation, and leveraging human expertise alongside technology—tax leaders can overcome these challenges.
Our International Tax professionals help clients navigate an increasingly complex global environment.
The information in this publication is current as of February 27, 2024.
This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.