A big majority of CFOs call AI and GenAI crucial technologies in supporting finance’s strategic decision-making; however, few are focused on GenAI in their tax function specifically
In just two years, generative AI (GenAI) has rapidly become a central part of the corporate world’s technological evolution. Given its ability to provide answers in plain language and quickly generate new content, GenAI has expanded beyond just technologists to find applicability in a number of different functions and departments — even in areas such as tax, audit & accounting that have historically been slower to adopt new innovations.
Despite GenAI’s rapid advancement, however, chief financial officers (CFOs) think there is room to do even more. According to a recent survey from KPMG of 100 CFOs, 70% say AI and GenAI are the most crucial technologies to support the finance function’s strategic decision-making. This portends significant investment in GenAI technologies throughout the tax, audit & accounting function, which means for corporate tax professionals, their daily work lives are starting to change dramatically.
“We need to understand that this is not only just groundbreaking technology, but this will also change the way we work and do business, lending itself to a culture shift in our industry,” explains Gregory Homen, Tax Partner and Tax AI Transformation Program Lead at KPMG US. “It’s leading to tax departments having to retrain and reschool its workforce for different attributes — and is redefining what a tax professional or CPA is expected to do and how they will be performing work in the future.”
Inverting the pyramid
The tax world is currently in a state of flux, brought on by a host of international regulations and reform such as Pillar Two, the potential for significant US tax changes ushered in by the new Trump administration, and more. Even with this massive upheaval, Homen says GenAI still remains one of the number one topic his clients want to discuss.
In fact, he explains, this time of disruption and change may create more of an impetus for tax departments to adopt GenAI — and faster. “All of the uncertainty forces the need to accelerate the understanding of information. It was an aligning of the stars, if you will, when this technology entered the public domain with force in late 2022, becoming more mainstream.”
We need to understand that this is not only just groundbreaking technology, but this will also change the way we work and do business, lending itself to a culture shift in our industry.
He compares tax professionals’ daily tasks to a pyramid, in which the majority of a tax professional’s daily work consists of repeatable, automatable tasks. This creates the base of the pyramid. The middle of the pyramid consists of data orchestration — entering, classifying, and ultimately cleaning tax data. And the remaining smaller portion of the work at the top is where the true value lies — applying tax professionals’ expertise to create and exercise value-added activities. Particularly in times of change, Homen explains, “it’s hard to add value when you’re trying to wrap your arms around the current state — GenAI is allowing us to automate a lot of those more time-consuming tasks.”
In fact, GenAI may flip this pyramid on its head, Homen adds. “That routine task can now be automated. Even with GenAI, tax departments will still require a human-in-the-loop review of the data and information. That said, the introduction of GenAI is affording us more time and energy to look at the value-add attributes — for example, how we can take a law, digest it, and understand more quickly how it impacts a company and its tax position and future strategies.”
Indeed, when asked about the top ways they expect GenAI to impact the finance function, more than half of CFOs in the KPMG survey cited improved decision-making with predictive analytics (56%) and the ability to analyze large amounts of financial data in a short period of time (51%). A number also cited being able to automate tasks to reduce manual errors (37%) and streamline operations and processes (32%).
Deriving value from GenAI in tax
But even with those benefits coming to the fore, GenAI adoption is still far from universal. Homen explains that there are common fears around GenAI implementation that have to be overcome in order to derive real value from the technology. CFO respondents to the KPMG survey pointed to a number of potential barriers to GenAI adoption, including fears of data security breaches (69% of respondents), compliance and regulatory risks (52%), and accuracy and reliability of financial information (45%). And there is another major barrier that could prevent GenAI from implementation: data governance.
The output of a GenAI tool is only going to be as worthwhile as the data feeding the model and how well data systems can interface with one another. Even for advanced tax departments, Homen notes that next step is ensuring that enterprise data is not only organized but has the ability to be shared from one system to another, specifically noting the need for an interface with GenAI.
These small victories as not just efficiency gains but are driving value by allowing tax departments to stand out among other business functions through their proper and responsible use of company data.
This can be a large lift for many time-strapped departments, to be sure. But getting to this end goal can begin with small steps — even simply ensuring that data and documents are saved within proper systems rather than on an individual’s desktop. Homen describes these small victories as not just efficiency gains, but as driving value by allowing tax departments to stand out among other business functions through their proper and responsible use of company data.
“Large language models exist for everybody, right?” he says. “The competitive advantage lies in having access to the right one and infusing accurate data into these models.” So ultimately, the models can offer insight into your data and ultimately allow you to make better and more informed data-driven decisions
Yet, many corporate tax departments are not yet at this point. GenAI’s implementation in the tax, audit & accounting world still has a lot of untapped potential, but if indications from CFOs in the KPMG survey are correct, the finance world at large and the tax industry by extension will be receiving a lot of GenAI interest and investment in the immediate future.
Then, it will be on tax professionals themselves to take that interest and turn it into true and lasting value.
You can learn more about the challenges tax professionals face with technology & innovation here
