Macro trends in the global economy fueling the need for an overhaul in how we manage the complexities of taxation, helping us gain insights into how individuals and businesses can better plan to meet their tax obligations.
FREMONT, CA: Business and regulatory changes have always impacted the tax industry, but recently they have accelerated exponentially. Taxes have seen dramatic and disruptive innovations due to technological, cultural, societal, and corporate factors, similar to other domains of fintech. The tax industry now functions in a complex ecosystem where inconsistencies in local, state, federal, regional, and international law frequently result in discrepancies. Expert tax services must be combined with technology to meet taxpayers' reporting and planning needs.
Macro trends and tax implications
Macro trends in the global economy fueling the need for an overhaul in how we manage the complexities of taxation, helping us gain insights into how individuals and businesses can better plan to meet their tax obligations.
Among these macro trends, global tax regulations are evolving to address the taxation of international e-commerce transactions, remote work, the gig economy, and the emergence of crypto assets, all fueling cross-border transactions. The COVID-19 pandemic has significantly accelerated the growth of these activities.
The implementation of TaxTech will require much greater digitization of tax tools. It will rely upon advanced technologies utilized in fintech solutions, such as AI, ML, NLP, and data-driven analytics.
Solutions with these elements will be embedded in existing fintech tools, potentially providing financial service providers with a greater competitive advantage, customer stickiness and loyalty, and granular data to help provide customers with enhanced, personalized service.
Solutions with these components will be integrated into current fintech technologies, potentially giving financial service providers a stronger competitive advantage, customer stickiness and loyalty, and detailed data to support more effective, individualized customer care.
The Taxtech era
Some tax sector segments could be hesitant to adopt new technology and be reliant on analog operations. Better technologically advanced solutions that can connect systems and automate processes to simplify taxes could aid in the ongoing digitization of the sector. Key requirements for TaxTech solutions include the widespread digitization of financial tools, improved automation through machine learning (ML) capabilities, and the pervasiveness of cloud-based platforms, including cloud-based ERP solutions. Additionally, TaxTech makes use of industry-transformative technologies like blockchain, natural language processing (NLP), and artificial intelligence (AI) to possibly transform the sector. The TaxTech industry is still considered a nascent ecosystem, but it was already able to offer solutions considered science fiction a few years ago, like real-time reporting.
