A professional colleague recently asked what the actual difference is between artificial intelligence and digitisation in taxation.

The answer is simple: one is the prerequisite for the other, or in other words, one – digitisation in taxation – paves the way for the other – the use of artificial intelligence in taxation. Sometimes we get the feeling that the rampant progress of digitisation in taxation is making our lives a misery. Yet once we are past the rollout difficulties, we finally realise how our work has become simpler, faster and more accurate in so many areas. Digitisation and automation make our existing procedures smoother and easier to carry out. Artificial intelligence, for its part, takes this to the next level, since it will be capable of working on huge amounts of data and identifying the correlations and deviations from rules instead of us, whilst also correcting and improving them.

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But where are we with digitisation in taxation?

The WTS head office in Munich together with the German Research Center for Artificial Intelligence studied this level of digital maturity with regard to taxation in the course of 2018 in 34 countries around the world. The interest is palpable; this year 85% of those participating in the research indicated that digitisation in taxation is now an everyday project at their company – though admittedly, only 5% of the respondents thought implementing artificial intelligence was feasible just now.

“Financial and tax leaders have long since recognised the need to digitise and automate tax processes, and in fact they are investing more and more in this area on an international scale. They are fully aware of the opportunities that intelligent taxation solutions open up, and they know that IT infrastructures as well as organisational structures need to develop too. Yet they are more reserved when it comes to deploying artificial intelligence” – said Fritz Esterer, Chairman of WTS Global, summarising the latest research carried out by the group.

Obstacles in the way of artificial intelligence

The digital transformation and in particular the use of artificial intelligence are subject to certain conditions. The availability of data and the structure of the organisations dealing with that data are crucial for example. The analyses show that this is where the discrepancy between the ideal situations planned by companies and actual reality is the greatest. Only 46% of the respondents said that the necessary data is available at their company in a digital format and properly prepared for process automation.

“The levels of digital maturity at tax functions are extremely diverse, especially access to data and the use thereof. Yet we need standardised and well-structured tax data lakes to be able to take advantage of appropriate tax solutions” – explained Prof. Dr. Peter Fettke, scientific director of the research.

Another major hindrance is the lack of a digitisation strategy and that appropriate budgets have yet to be allocated for implementation purposes. Almost two thirds of the respondents flagged this problem. But even the fact that business processes in tax departments are not always completely digitised by IT systems is a limiting factor – this is only the case for 18% of companies.

The companies taking part in the digital transformation not only have to deploy new technologies and solutions, they also have to ensure employees have the right knowledge too. Many experts have heard about the possibilities inherent in artificial intelligence, but have not yet been able to obtain more in-depth professional know-how. It is already clear that training on this type of content and associated change management processes will be sought-after in the future.

When can we introduce intelligent solutions and what do we stand to gain?

Digitisation in taxation introduces new standards of quality and efficiency, better transparency and major cost savings. The first areas of application clearly emerged with tax disciplines that work on large amounts of data and with repetitive tasks.

The four main groups now are wage taxes and contributions, VAT, transfer pricing and customs. It is primarily in these fields that new tools can help to identify errors that previously would have gone unnoticed with manual approaches.

“The research revealed just how necessary it is to map the right processes accurately and eliminate anomalies. The process mining method can be applied in these very situations. It helps to identify processes, examine compliance, and evaluate digital maturity at the given company” – concluded Tim Niesen, a researcher at the German Research Center for Artificial Intelligence.

Determining the level of digital maturity is a fundamental requirement before moving forward. This is why WTS in Germany, together with the research centre, has put together an assessment methodology based on the results of the research, which focuses on four areas: strategy, data, processes and technology.

“This helps our clients not only see their current position accurately, but they also receive guidance as to what direction to take next” – explained Vanessa Just, Project Manager for Artificial Intelligence at WTS.

Further videos and articles related to artificial intelligence can be found on the WTS AI homepage. The latest study by WTS Global and the research centre can be downloaded here.

The digitisation in taxation will achieve the most and be the most efficient if it is adapted to the company’s individual situation. That is why we at WTS Klient Hungary place high value on tailored implementation. Feel free to contact us if you want to simplify the taxation of your company with automated and digitalised solutions!