Following the radical changes awaiting Brazil in its tax regulation, a new report from the Thomson Reuters Institute highlights the positive outlook that tax professionals, particularly those in corporate tax, have towards technology and its potential to enhance their efficiency
Technology will play a crucial role in Brazil’s fledgling tax reform plans. The nudge to leverage technology is stronger than ever: With the digitalization of many government agencies, tax authorities are starting to use technology and artificial intelligence (AI) to monitor tax collection and compliance.
Consequently, individuals and businesses may seek ways and their own AI-driven tools to help them minimize risk and fulfill their compliance obligations. Additionally, the substantial changes to tax rules because of the nation’s planned Tax Reform have generated a large amount of rapidly evolving information, making it difficult for people to stay informed about all the new developments and understand the impact on their businesses.
Numerous studies have demonstrated that technology is a cornerstone for growth, development and progress, contributing importantly to enhancing productivity and fostering innovation within different sectors of the economy. Particular to the tax industry, evidence from studies has shown that investment in digital technologies for various tax administration tasks delivers positive results in compliance, efficiency, and revenue.
Professionals in corporate tax departments will likely bet on technologies to help them transition to the new model, becoming more efficient with their time, while minimizing risks and reducing human errors.
Nonetheless, other studies have aimed to analyze the technological limitations within the tax industry that, in some cases, prevent the realization of technology’s full potential. The barriers include insufficient technological infrastructure and connectivity, reluctance or resistance from taxpayers and tax collectors, inadequate institutional integration, and an unsupportive regulatory environment.
The origin of some of these challenges lies within the government sphere, so tech users in the tax industry may not have the ability to address all of these concerns on their own. However, one challenge they can tackle is the lack of adoption or resistance. Specifically, in the context of the Tax Reform’s many upcoming changes, tax professionals, tax & accounting firms, and in-house corporate tax departments in Brazil may want to adopt a proactive approach towards technology to help the professionals there work better and faster.
The Brazil Tax Reform and the tech outlook
A recent report from the Thomson Reuters Institute provides insights about corporate tax professionals’ awareness and preparedness for the Tax Reform in Brazil. According to survey findings from the Brazil Tax Reform: Insights, challenges and opportunities for corporate tax professionals report, the most cited concerns among professionals in corporate tax departments about the Reform plans are the overload of work and increased costs to learn and adapt their current tax management systems to the new rules during the transition period from the old tax model to the new one.
While technology and AI may not help professionals solve these negative impacts completely, they can help facilitate the transition substantially. In fact, the report also finds that, given the Tax Reform plans, tax professionals’ expectations around their tax management systems converged on two primary abilities: i) increased automation and accuracy in updated tax calculations, generation of ancillary obligations, and tax assessment; and ii) agility in implementing new SPEDs (Brazil’s Public System of Digital Bookkeeping) and electronic tax documents.
Indeed, professionals in corporate tax departments will likely bet on technologies to help them transition to the new model, becoming more efficient with their time, while minimizing risks and reducing human errors. Research results from the report on investment expectations in tax management solutions showed that at least 50% of respondents said they anticipate a sustained and significant growth in their departments’ investment during the first four years of the reform. Additionally, two-fifths of respondents projected that increased investment in these systems will continue beyond the first four years, extending until the end of the Tax Reform’s transition period in 2033.
At least 50% of survey respondents said they anticipate a sustained and significant growth in their tax departments’ investment during the first four years of the reform.
With the significant changes brought by Brazil’s Tax Reform plans, a successful transition will demand more than just new and adapted tech systems and solutions. To fully capture the benefits of technology, organizations will need to develop an integrated and strategic plan of action.
Many tax professionals are well aware of this, as the report shows, and they also expect their organizations to increase investment in talent, training, external consultancy, and process updating during the transition period. Therefore, in addition to leveraging tech systems, organizations and their internal tax departments will need to keep up with new rules and developments, train their talent, collaborate internally with other areas such as legal, compliance, and finance, and externally with experts and advisors.
Through this approach, corporate tax professionals will be better able to lead and navigate their businesses optimally through the transformative changes that Brazil is experiencing.
You can download a copy of the Thomson Reuters Institute’s recent Brazil Tax Reform report here.
