94 per cent of CEOs and tax leaders feel GenAI will play a crucial role in changing the taxation landscape and enhancing tax functions
Generative Artificial Intelligence (GenAI) can change the taxation domain significantly. This is what tax leaders and CEOs in India believe. According to the EY Tax and Finance Operations (TFO) Survey 2024, 94 per cent of CEOs and tax leaders expect a significant change in the taxation domain due to GenAI. They expect it to improve the effectiveness of tax functions.
Says Rahul Patni, Digital Tax Leader, EY India: “GenAI is clearly emerging as an effective tool for tax professionals to transform their workspaces and professional lives; every tax professional should learn about Gen AI, and start applying it in routine tasks. Areas of application can range from AI-assisted document reviews to data cleansing and drafting business deliverables for day-to-day matters. This will allow them to work more effectively, focus on strategic priorities, and make better decisions.”
The survey reveals that 14 per cent of Indian tax leaders and corporates are engaged in exploring various early-stage applications of GenAI. They are piloting projects and developing strategies to suit their requirement.
Around 47 per cent are exploring, investigating, and experimenting to check GenAI’s potential for them to enhance their operational working. This is seven per cent more than the global average of 40 per cent.
As the concept is still new, 44 per cent of the respondents felt that lack of understanding about GenAI and what all it can do is a ‘major barrier’. It shows that 46 per cent of the respondents in India spend most of their time collecting data and preparing tax returns, but tax leaders believe that the time consumed in routine tasks can significantly be reduced to 20-25 per cent of their time, should more ‘strategic initiatives’ be taken.
According to Jitesh Bansal, National Leader, Tax and Finance Operate, EY India, “As regulatory and reporting burdens grow, tax and finance functions face increasing strain. Tax teams in companies will need to step out of their comfort zones and start addressing newer problems around tax function strategy, processes, data quality, audit readiness, and so on. The need of the hour is for tax and finance functions to have access to expert tax knowledge, combined with a working knowledge of process, data, and technology, whether in-house or through external support. The chosen operating model should allow flexibility, modularity, talent management ability and best practices.”
The survey highlights the need for tax experts with the knowledge of data, technology as well as the processes. It also reveals that inflation and cost pressures leading to a cut in tax and finance budgets are the major concerns of tax professionals.
With ever-increasing regulatory requirements and huge data availability, taxation responsibilities are becoming ‘more complex and data-heavy’. The Base Erosion and Profit Shifting 2.0 (BEP 2.0) Pillar Two Rules, for instance, add to the burden on tax functions.
While the regulatory requirements are for the benefit of everyone, fulfilling them means dealing with a lot of data in a timely manner. That is why companies are looking for alternative ways to make the function work efficiently, timely, and at a lower cost.
Around three-fourths (72 per cent) of the respondents think that there are few people joining the accounting profession and that retirement of the senior tax and accounting professional would be disadvantageous in the next five years. It reveals that 59 per cent of the Indian companies are considering changing their tax and finance models.
The survey indicates the gap in the tax skills and data and technology skills and highlights the issues tax leaders and corporations are facing and expects GenAI to fill this gap.
The survey was conducted in 32 countries and in 18 industries. It included 1600 leaders including 70 chief financial officers and tax leaders or Indian corporate.