The world around us is changing at an astonishing pace.
Take robots recently competing in a fully autonomous three-on-three football tournament as one example. Or an AI-powered fridge that helps you with your shopping list as another.
Tax administrations around the world are also reinventing themselves. The
The aim of the OECD's so-called
However, there are a few issues with this stated objective. The OECD has no levers to ensure alignment by member states and less so beyond. In reality, each national government develops its own approach to digitalization. This results in new layers of complexity for taxpayers and especially for global businesses.
This kind of complexity is exactly what the recently published
Tax digitalization plays a prominent part in this year's edition. As one expert puts it: "What we are experiencing is the transition from traditional bureaucracy to electronic bureaucracy. This involves there being multiple online platforms for various submissions, each requiring different credentials. Instead of visiting each department in person, we now navigate different electronic systems."
Charting the global shift toward digital tax
In line with the OECD's vision of moving tax processes closer to taxable events, governments around the world are implementing e-invoicing mandates, real-time reporting and digital tax portals.
The drivers for such initiatives are clear: transparency, efficiency and fraud reduction. South Korea's Tax Integration System, for example, enables 97% of corporate income tax returns to be completed online, cutting compliance costs by nearly £5 billion.
Timings for the implementation of initiatives differ significantly by market. Approximately 60 countries have already introduced some form of e-invoicing, with this number expected to reach 100 by 2030.
Simply throwing a digital layer on top of existing murky tax regulations doesn't always help —remember the "garbage in, garbage out" adage.
A good example of a carefully considered approach can be found in New Zealand. The government first
Complexity in practice: Why digital doesn't always mean simple
There are typically three main factors creating complexity during the implementation of tax digitalization:
- Fragmented local requirements. Think about different formats, different platforms, and varying deadlines. The PEPPOL (Pan-European Public Procurement Online) framework was supposed to be an exception. This interoperable framework for exchanging electronic documents between businesses and governments was originally developed in the European Union and then expanded globally. However, only 31 countries in Europe and seven outside of it currently accept this framework, with notable exceptions like Mexico, China and Egypt.
- Increased data granularity and real-time expectations. SAF-T (Standard Audit File for Tax) is an OECD standard for electronically exchanging accounting data between businesses and tax authorities, designed to streamline audits and enhance transparency through automated access to financial records. Although the OECD has released a common XML schema, different jurisdictions implement it in their own ways, often using unique formats and reporting requirements. For example, France uses a variant called FEC (Fichier des Écritures Comptables), which is like SAF-T but tailored to French tax rules, while Poland implements SAF-T under the name JPK (Jednolity Plik Kontrolny), with specific modules for VAT, invoices, and corporate income tax. For a global organization handling SAF-T requirements in both countries would still be separate exercises with little to no synergy.
- The need for localized software and in-country expertise. As the focus of tax authorities shifts toward data and digital formats, systems are coming under increasing scrutiny. As always, the choice is two-fold: buy it or build it. With many choosing to buy, the tax technology market is booming — by some estimates, it's reached $20 billion and is expected to triple by 2034. It's not so much about the quantity of tax technology start-ups, but rather about the quality and boldness of ideas. A quick look at the
Taxtech 500 forum reveals nearly weekly updates with new use cases and AI-driven tax applications that should pique the interest of any tax professional. One emerging trend is the erosion of previous boundaries between managed services and technology companies, with both now venturing into software development and adjacent services.
The heavy local compliance burden placed on global firms
These immediate complexities aren't theoretical; they affect the daily operations of multinationals in a number of ways.
A patchwork of digital tax reporting obligations requires companies to stay on top of the latest developments to avoid multiple risks. And the nature of those risks has evolved recently as well. On top of more traditional tax-related penalties and reputational risks, a new threat has emerged: operational risks. Simply put, your clients will not pay your invoices unless the government e-invoicing formalities are met.
With this comes rising costs for compliance infrastructure and advisory services. Irrespective of the choice to buy or build, handling emerging tax requirements and the related spike in complexity requires investments in time, effort, and money.
Last, but not least, the digital shift creates a greater exposure to audits and penalties due to automated cross-checking. It's not just a question of tax evasion — even bona fide taxpayers will need to review their operational finance procedures and controls. In the real-time reporting world, tax teams have no time to detect, adjust, and feed back into other parts of the finance function. Company systems must produce tax-ready numbers from the get-go.
Plan, don't panic
Despite all the complexities covered, there is room for optimism. The
Some actionable strategies that multinationals can employ to mitigate cross-border tax risks, and have proven effective both within our organization and across numerous global clients, include:
- Investing early in global tax technology platforms. Managing VAT compliance used to be the first association with tax technology, from tax engines to the automation of VAT returns. Today, the perimeter has widened — from tax workflow to tax research and direct tax technology. For a better understanding of recent developments (and overall tax tech upskilling), there are emerging qualifications in this niche, such as the
Diploma in Tax Technology . - Centralizing tax functions while maintaining local expertise. According to Gartner, finance transformation and redesigning the finance function have been a top priority for CFOs in recent years. And tax is part and parcel of that journey, even if it's not always in the front row. When centralizing tax functions, it's critical to plan for the local element —again, using the buy-or-build decision tree effectively.
- Partnering with third-party providers to absorb local complexity. Teaming up with third-party providers can help companies adopt proven best practices rather than repeat common mistakes. For example, re-assessing the local books requirements and ditching duplication, where feasible, might massively cut the required compliance budget.
These examples clearly emphasize the double-edged nature of digitalization in the tax arena.
Companies, especially those with growing global operations, will need agility, local knowledge and proactive planning. And while digitalization is inevitable, whether you sink or swim depends entirely on how well you can adapt to the uneven global rollout.
