2024-11-26 07:32:00
According to the report, this is a dramatic surge from just 19 per cent in 2023, further highlighting GenAI’s prowess in the tax industry.
The survey, which gathered insights from 1,600 leaders across 32 countries and 18 industries—including 70 CFOs and tax leaders from leading Indian corporates—highlights the key challenges and opportunities in the evolving tax landscape.
Indian tax leaders are ahead in their GenAI journey, with 14 per cent actively developing strategies, launching pilot projects, and exploring early-stage applications of the technology. Another 47 per cent are in the exploratory phase, investigating and experimenting with how GenAI can help in their operations.
This surpasses the global average of 40 per cent, showcasing India’s proactive stance in embracing this technology.
Rahul Patni, Digital Tax Leader, EY India, said that GenAI is an effective tool for tax professionals to transform their workspaces and professional lives. “…every tax professional should learn about GenAI, 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,” he said. However, the survey reveals significant barriers to adoption, with 44% of respondents citing a lack of skilled talent and limited understanding of GenAI’s capabilities as major challenges.
As per the global insights from EY, three pressure points stood out in the survey:
- All businesses are contending with more demands for real-time filings, including e-invoicing.
- Large businesses are struggling to comply with global tax reforms developed by the Organisation for Economic Co-operation and Development (OECD)/G20 Inclusive Framework.
- Many businesses are bracing for the required public disclosure of more information about their tax and finance affairs by governments.
The survey finds that 46% of Indian respondents (and 45% globally) spend much of their time on routine tasks such as data collection and tax return preparation. Tax leaders believe these activities should ideally take no more than 20-25% of their time, allowing them to focus on strategic initiatives.
“Survey respondents say complying with real-time and digital tax filings is the most “significant” emerging reporting requirement for tax and finance functions. More countries than ever require e-invoicing, which involves transmitting specific data to tax authorities, typically in real time. Governments take this approach because once they have the data, they can determine the amount owed. This puts enormous pressure on businesses to be sure the data is accurate and reliable, and it effectively shifts the audit cycle forward, essentially resulting in real-time examinations,” the report read.
For the first time, cost pressures have emerged as the top concern for tax and finance functions. Inflation and budget cuts have led 91 per cent of Indian companies to plan reductions in their tax and finance budgets. Simultaneously, new regulatory requirements, such as BEPS 2.0’s Pillar Two rules, are adding complexity to tax operations.
According to the survey, 59 per cent of Indian companies, in response, are considering changes to their tax and finance operating models. This signals a shift towards alternative approaches to managing operations more effectively.
Jitesh Bansal, National Leader, Tax and Finance Operate, EY India, noted the urgency for tax teams to adapt.
“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,” Bansal said.
The survey showed a looming talent crisis in the tax and finance sector. According to 72 per cent of Indian respondents, the profession faces a significant disadvantage due to fewer accountants entering the workforce and the retirement of senior professionals over the next five years.
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What are the main challenges Indian businesses face when adopting generative AI in tax operations?
**Interview with Rahul Patni, Digital Tax Leader at EY India**
**Interviewer:** Good morning, Rahul. Thank you for joining us today. With the recent EY Tax and Finance Operations Survey revealing a dramatic increase in recognition among Indian CFOs and tax leaders of generative AI’s potential, what do you believe has driven this surge from 19% in 2023 to an impressive 94% in 2024?
**Rahul Patni:** Good morning! The rapid adoption of generative AI is largely driven by its transformative potential in streamlining tax functions and enhancing operational efficiency. As organizations increasingly face complex regulatory requirements and the demand for real-time compliance, GenAI offers solutions that can automate routine tasks, enabling tax professionals to focus on more strategic priorities.
**Interviewer:** You mentioned operational efficiency. What specific areas within tax operations do you see GenAI impacting the most?
**Rahul Patni:** GenAI can vastly improve several areas, including AI-assisted document reviews, data cleansing, and drafting routine business documents. By automating these routine tasks, tax professionals can allocate more time to strategic decision-making, leading to better outcomes for their organizations. The survey indicates that 46% of Indian respondents currently spend a significant portion of their time on tasks that ideally should take up much less of their time. This presents a clear opportunity for GenAI to make a difference.
**Interviewer:** While the potential is clear, the survey also indicated significant barriers to adoption. Can you elaborate on these challenges?
**Rahul Patni:** Absolutely. The survey highlighted that 44% of respondents face significant challenges due to a lack of skilled talent and a limited understanding of GenAI’s capabilities. This skill gap is a crucial barrier that companies need to overcome to fully leverage the benefits of generative AI. Structured training and awareness programs can help bridge this gap, ensuring that professionals are equipped to utilize these advanced tools effectively.
**Interviewer:** It’s interesting to see India leading in GenAI adoption compared to the global average. What factors contribute to this proactive stance?
**Rahul Patni:** India’s proactive approach can be attributed to several factors, including a strong tech infrastructure, a large pool of tech-savvy professionals, and an evolving regulatory landscape that is increasingly favorable towards digital transformation. Moreover, as businesses face mounting pressure to meet real-time filing requirements, companies are eager to adopt technologies that can facilitate compliance and enhance operational efficiency.
**Interviewer:** You mentioned real-time filings as a significant challenge. How do you see businesses coping with this shift, particularly in light of the increasing demands for e-invoicing and public disclosure?
**Rahul Patni:** The pressure for real-time data accuracy is indeed a major concern. Businesses must adopt robust data management systems and invest in technologies that ensure compliance with real-time reporting requirements. The shift means that tax professionals will need to rethink their workflows and embrace technology that can guarantee data integrity and reliability, essentially turning compliance into a proactive rather than reactive process.
**Interviewer:** what advice would you give to tax professionals who are still hesitant about integrating GenAI into their workflows?
**Rahul Patni:** My advice would be to start small—identify one or two routine tasks that could be automated and experiment with GenAI solutions for those tasks. Familiarity and hands-on experience will build confidence. It’s essential for every tax professional to recognise the value GenAI can bring to their roles and to begin integrating it into their daily operations. The future of tax is undoubtedly digital, and embracing that change is crucial for career growth.
**Interviewer:** Thank you, Rahul, for sharing your insights on this critical topic. It’s clear that generative AI has the potential to revolutionize the tax landscape in India and beyond.
**Rahul Patni:** Thank you for having me. It’s an exciting time for the tax industry, and I look forward to seeing how these changes unfold.