Harnessing AI’s Power Is Critical for Tax Practices’ Success

Advancements in conventional artificial intelligence, along with the introduction of generative AI, are bringing about new excitement around its application, capabilities, and more.

Business leaders are shifting their focus to AI to enhance decision-making and modernize systems, with the goal of streamlining operations and managing costs across the organization—including tax.

No matter where you are in your AI journey, the opportunities and benefits for tax are limitless. Many tax functions have already embraced AI solutions in some way—with one of the most common applications being automated categorization of data for direct and indirect tax purposes. But this is a drop in the bucket of what’s possible, especially with the introduction of GenAI, which goes beyond conventional AI to create content.

Gaining a baseline understanding of the distinct kinds of AI technologies available, as well as their capabilities and benefits, can help better equip your tax function. It’s also important to understand your organization’s broader AI strategy and the effects it may have on tax. We’ve even seen the tax function driving and motivating broader company strategy by raising impactful real-world use cases.

PwC has been uncovering, tracking, and validating new use cases for AI within tax for years. We’ve learned a lot from our experience, including the value of adopting a holistic and responsible approach to AI (and to technology as a whole). Some actions to consider:

Solve problems with the “right” solution. Identify the existing issues that you’re looking to solve, then assess which technology tool is the more suitable fit to help achieve sustainable solutions and better outcomes. You may be surprised by how many use cases can be solved with conventional AI or other automation tools.

Prioritize your data. Develop a centralized repository for your tax data to help improve your automation capabilities, including your use of conventional and generative AI.

Start small, scale up. Consider using cases with non-sensitive data and low complexity to exhibit value while helping to train your people. Scale what’s working and what will fit within your organization’s culture and strategy, which may include adapting an AI solution built for another business function for tax purposes.

Be responsible. Embrace responsible AI principles such as security, data privacy, transparency, and governance by developing a responsible AI framework to help manage risks, build trust, and enable ethical use.

AI should augment human intelligence, not replace it. An AI-enabled tax organization is necessary to keep up with regulatory and compliance demands, especially with fewer people entering tax and accounting. AI is a powerful tool, but it lacks a fundamental quality that humans possess—judgment.

AI can process data and identify patterns but can’t replace human intuition. It also can’t carry out tax technical review, make strategic decisions, or provide oversight and governance. As a result, a balanced mix of resources in conjunction with AI-powered solutions can help your tax functions yield better results and deliver the greatest return on investment.

As with many emerging technologies, new skill sets and upskilling will be needed to help adapt to new demands around AI adoption in tax. Traditional tax technical resources will still play a significant role, but with greater emphasis on digital know-how. Less conventional roles, such as data engineers and project managers, could help build more sophisticated AI capabilities, deliver better data, enhance decision-making, drive productivity, and reduce overall risk.

A fresh look at your tax function operations with AI in mind—including talent, technology, processes, and desired outcomes—can help you identify gaps and pave a path forward to achieve your goals. This evaluation may directly impact your tax operating model. In the short-term, supplemental resources (such as accessing talent pools) or third-party support may help your team meet reporting demands, develop an AI strategy, build AI-based solutions, deliver training, or provide other services.

Here are some examples of how tax functions are embracing AI capabilities and solutions across three broad areas to empower tax transformation and efficiency:

Data wrangling. AI, machine learning, and other automation tools (or some combination) can help gather, clean, and enrich data to achieve a single source of truth for all areas of tax and transform raw data for insights. Streamlining and enhancing the quality of the data not only benefits tax functions operationally, but also better aligns tax as a strategic business partner.

Human-led, tech-powered decision-making. AI-supported decision-making can help enable you to quickly incorporate and analyze far more information than you (or any human being) could do on their own, while generating real-time insights, predictive analytics, and interactive visualizations. As a result, tax personnel can focus on more high-value tasks and strategic initiatives.

Documentation: GenAI can produce a high-quality first draft of memos and disclosures on a variety of topics (including transactions, Pillar Two, and ESG) that your professionals can review and improve as needed. Automating these drafts can help tax respond more quickly and consistently—even as rules or facts and circumstances change—to produce templates in line with both leading practices and your company’s strategy.

Layering GenAI capabilities onto existing AI and automation solutions can enhance quality and deliver additional value to the tax function and beyond. Early involvement from tax can lead to the identification of pay-fors that can potentially offset increased compliance costs and transformation efforts. For example, the implementation of a GenAI program for the business could help generate R&D credits.

AI can serve as a game changer for tax. Whether you want to achieve fast insights and analytics on your data or reimagine an AI-enabled tax organization, the integration of AI capabilities and solutions into your broader tax ecosystem can help you reach your goals while positioning you to grow and scale for the future.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Nolan Ogden is PricewaterhouseCoopers’s US tax technology leader. He provides clean, simple solutions to complex data and operational challenges within tax functions.

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