Strategic readiness in indirect tax

One company has been putting off investment in new tax technologies, so it is struggling to keep up with the local filing rules and compliance deadlines. This company’s tax department is also having trouble with unanticipated regulatory changes, jurisdictional rate calculations, and higher-than-normal error rates made by a staff that is over-stretched, under-resourced, and technologically unprepared for anything close to real-time tax reporting.

Meanwhile, the other company has already centralized its tax processes through an enterprise resource planning (ERP) system and has invested in technologies that automate much of the indirect tax compliance process. Regulatory changes, filings, local tax rates, calculations, exemptions, reconciliation, and reporting are all automated, so missed deadlines and calculation errors are not an issue. Consequently, this company’s tax department has plenty of time to answer questions from tax authorities, quickly supply requested documentation, and provide a smooth glide path to launch—all in a matter of hours.

The latter company in this scenario demonstrates a high degree of flexibility and responsiveness, while the former company does not.

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The power and need for strategic readiness in tax

Proactive vs reactive tax functions

Strategic readiness requires a strong technological foundation

Technological change also means cultural change

The payoff: Efficiencies and ROI

The long-term value of strategic readiness in tax departments

The power and need for strategic readiness in tax

In the context of indirect tax management, strategic readiness means the ability to respond and adapt to tax demands swiftly and accurately by (and this is key) leveraging technology to anticipate upcoming challenges and pro-actively prepare for them.

The need for proactive tax management is being driven by a global trade environment wherein international regulatory bodies are moving rapidly toward universal e-invoicing  and real-time tax reporting amid a global tax landscape that has never been more complex or volatile. Constant change is the only certainty in this environment, so companies need to update their tax systems and processes to adapt to the new tax realities they are facing.

Yet despite ample warning that such changes are necessary, many companies and their tax departments are still stuck in the static, reactive patterns of the past. Indeed, according to the Thomson Reuters 2025 Indirect Tax Report, almost two-thirds (61%) of multinational tax departments say they are still in the early stages of adopting automated tax technologies, even though more advanced tax technologies powered by generative artificial intelligence (GenAI) are already poised to revolutionize indirect tax in the next few years.

Not only do these departments struggle to keep up with the accelerating pace of digital taxation, they also lack the capacity to benefit from the increasingly relevant role tax strategy plays in organizational leadership due to tax’s access to high-quality, company-wide financial data.

Proactive vs reactive tax functions

A proactive tax function operates differently. It has the tools and skills to meet its reporting obligations, of course, but it can also plan and prepare for the future using predictive analytics and scenario modeling based on real-time, error-free data.

This one-two punch of automated tax compliance and proactive data analytics provides companies with a significant competitive advantage, especially when it comes to entering new markets. Companies with these capabilities can enter markets faster, adapt immediately to regulatory changes, communicate more effectively with tax authorities, leverage their data to make dynamic pricing and tax-strategy decisions, and more easily embrace new business models.

By contrast, companies without this kind of flexibility generally have a more difficult time meeting compliance obligations and run a higher risk of errors and penalties, all of which can undermine their ability to enter new markets and compete with companies that are unencumbered by such problems.

In the end, what companies that fail to invest in their own strategic readiness find is that the decisions they make in the short term—to save money, conserve resources, resist technological change—turn out to be counterproductive in the long run. While other companies are upgrading their tech stacks to meet the tax and data demands of the future, companies that cling to their own status quo risk creating a difficult and unsustainable future for themselves.

Strategic readiness requires a strong technological foundation

The technological foundation for a strategic tax function is a cloud-based, automated tax engine that integrates seamlessly with a centralized ERP and pulls transaction data from e-commerce platforms and other relevant business management tools.

The integrated, cloud-based nature of such systems makes real-time tax calculations possible and powers an infinitely scalable technological ecosystem flexible enough to meet the tax demands of even the most aggressively growth-oriented companies.

The clean, high-quality data these systems provide also enables much more accurate forms of predictive analytics, which can provide valuable operational insights to the larger organization and help transform tax from a back-office compliance function to an important provider of business intelligence.

Technological change also means cultural change

A strategic tax function needs more than a strong technological foundation, however—it also requires changes in a department’s mindset and culture. Tax professionals need to be trained to get the most out of the technology, naturally, but they also need to learn how to communicate more effectively with other business functions (finance in particular) and how to assert the tax function’s newfound strategic value.

These are cultural shifts that impact the larger organization, so they require the support of leaders at the top and a company-wide awareness of the changes involved and their strategic value. A certain amount of disruption is involved in such shifts, which is why many companies hire experts in organizational change management to help with the transition or assign the task to an internal team.

The payoff: Efficiencies and ROI

The payoff for these efforts is substantial.

An independent analysis of the Thomson Reuters ONESOURCE indirect tax platform by Forrester Research found that a company with roughly $5 billion in revenue and 28,000 employees could expect a ROI of 120% over the first three years and realize close to $6 million in savings. Furthermore, the system was found to pay for itself in approximately 15 months.

Lower error rates, efficiency gains, and less need for IT support accounted for most of the savings, but the report also noted several “unquantified” benefits, such as more accurate tax payments, reduced time-to-market for new products, improved reliability, and fewer costs related to upkeep of legacy tax solutions.

The long-term value of strategic readiness in tax departments

Though the short-term advantages of transitioning to a centralized, automated tax system are impressive, the cumulative benefits over time are where the true value lies. A more efficient tax department that saves money by avoiding errors and penalties is good for business, of course, but what’s even better is a tax department that has the power and skills to extract actionable tax strategies and business intelligence from its data. This in turn leads to better overall decision-making, more optimal business management, improved supply-chain security, and that most elusive of business qualities—competitive agility.

Tax has for too long been regarded simply as a back-office compliance function, but new tools enhanced by artificial intelligence and deployed by skilled tax professionals offer the potential to elevate tax’s status to a trusted business partner and provider of valuable, data-based insights and intelligence.

No multinational company can afford to squander such an opportunity or ignore the increasingly complex technological demands of international taxation. Strategic readiness requires action, and the time to act is now.

To learn more about the importance and benefits of best-in-class tax solutions, visit Thomson Reuters ONESOURCE resources page.