The tax industry has undergone a significant technological transformation over the last few years, most recently related to the use of Artificial Intelligence (AI). Whilst AI adoption remains relatively low across the sector, 2025 has marked a turning point with rapidly increasing interest and implementation across the tax department and into finance as data providers to the team. Tax professionals are grappling with understanding not just what AI is but how it can deliver practical value in their daily operations both now and in the future as the technology continues to evolve at pace.
The current landscape
Most tax professionals today find themselves in a familiar position—recognising AI as the next significant technological advancement but lacking clarity on practical implementation and “the art of the possible.” This mirrors previous technology adoptions like the introduction of data processing tools like Alteryx, robotic process automation (RPA), and machine learning, where initial scepticism eventually gave way to widespread adoption. The challenge isn’t just technical understanding but also identifying valuable use cases that justify the investment required. As for prior technologies, tax often has the ability to be early adopters of these advancements, leveraging broader initiatives to showcase the rest of the business “how it’s done.”
The AI market is currently dominated by two primary approaches: software providers integrating AI into existing solutions and professional services firms developing proprietary AI intellectual property for licensing. However, organisations are increasingly considering building their own AI capabilities using commonly available tools, such as Microsoft Suite, which increasingly offer AI functionality at relatively low incremental costs and avoid issues associated with sharing sensitive tax-related data outside their own ecosystems.
Four key themes of the impact of AI
AI’s influence in tax currently manifests across four key areas: data, knowledge, efficiency, and insight.
Data enhancement represents perhaps the most immediate value. AI excels at correcting poor-quality or incomplete datasets based on historical patterns—helping to address the age-old issue of “garbage in, garbage out” with high levels of confidence. Tax teams are using AI to validate VAT data, reconcile customer and supplier information, automate transaction reviews, and even extract data from PDF invoices, building confidence in data and enabling that data to be produced “on demand.”
Knowledge management sees AI combining structured and unstructured data to provide rapid insights. R&D tax credit projects exemplify this, where AI supplements financial data with prior claim outcomes and questionnaire responses in order to produce accurate first drafts. The technology automates tax research, monitors global tax developments, and provides initial impact assessments, which saves countless hours, reduces the risk of missing key information, and enables the total value of claims across the business to be maximised by identifying the additional information needed to maximise value.
Efficiency gains emerge as AI automates decisions and processes previously requiring human intervention, with increasing accuracy and confidence. From reconciliation automation to tax form population and validation, AI acts as a resource multiplier for tax teams. It identifies issues, researches precedents, and presents professionals with recommended courses of action, effectively functioning as an intelligent assistant. This enables tax resources to have all the information needed to swiftly and confidently make a decision, helps accelerate the trend of tax as being value-added business partners, not a compliance and reporting function, and is essential in a world where “real time” is increasingly important.
Insight generation allows tax professionals to quickly process and summarise vast amounts of information. Whether researching case law, analysing past decisions, or forecasting potential issues with new transactions or activities, AI serves as a powerful research tool that delivers comprehensive, easily digestible information with supporting links and detail and can help the tax team identify the potential implications of new business decisions being made today to minimise risk and ensure compliance in future. “What if” scenario planning is also a part of this.
Evolving professional roles in tax
Some may worry that AI will be replacing tax professionals, but AI represents the next evolution in an ongoing technological journey. Where automation changed how tasks were performed and machine learning structured decision-making logic, AI brings these technologies together with intuitive, human-like interfaces.
Tax professionals increasingly find themselves in business advisory roles rather than purely technical or compliance-focused positions, and AI has accelerated this trend. The technology enables professionals to work smarter, providing enhanced capabilities for real-time advice and more confident business guidance. The traditional role of the tax team as tax technical experts has long since evolved into data managers and providers of insights, as tax technical knowledge has become increasingly commoditised and now accessible to AI platforms as data sources.
However, this evolution requires new skills, and tax professionals must learn how to interact with AI, make queries, interpret AI outputs, manage data quality, learn “professional scepticism” regarding its outputs, and of course ensure ethical data and technology use. Success depends on building this level of understanding, evolving our level of trust over time, and developing new management styles for interacting with teams using AI systems and human resources.
Navigating risks and limitations
AI implementation in tax isn’t without challenges. The technology requires careful handling as outputs vary based on query construction, and results need thorough review and validation, at least in the short term. AI lacks the contextual understanding that human professionals possess and may amplify biases present in the data, though this will likely evolve over time.
Data security presents significant concerns, particularly as AI systems may interact with third-party platforms. Organisations must address ownership rights for AI-generated outputs and maintain audit trails that demonstrate the reasoning and logic behind AI recommendations. This means not just looking at the outputs or answers but ensuring full understanding and a clear audit trail of the processes used to deliver them.
Most importantly, in the short term at least, AI should be treated as a highly skilled junior researcher rather than a seasoned expert. All outputs require full professional review and should only serve as first drafts or initial research results.
The future tax function
Looking ahead three to five years, the tax function will likely feature smaller, more generalist teams supported by AI housing specialised tax technical knowledge together with a full history of prior business decisions and activities, along with their tax implications. Professional services firms are already hiring fewer graduates while focusing training on data analytics and AI/ML rather than traditional tax technical skills. Firms such as KPMG made the largest cuts, reducing its graduate intake for 2023 from 1,399 to 942.
This transformation aligns with tax authorities’ movement toward data-driven and real-time compliance models, with e-invoicing being a good example of this. The traditional periodic reporting and audit cycle is evolving toward continuous data sharing and monitoring, requiring tax professionals to operate increasingly in real-time environments. Tax can no longer be a retrospective compliance and reporting function but must be a real-time master of business data to ensure issues are identified and remediated swiftly.
However, all these changes bring the opportunity to fundamentally restructure tax operating models, potentially integrating outsourced functions and creating centralised data management and automation hubs. Success will depend on tax professionals’ ability to access comprehensive information instantly and translate AI insights into strategic business advice. It will also of course depend on the ability of leaders to successfully navigate their teams through this change with a clear vision of the future and the journey to achieve it.
Embracing the AI journey
The AI revolution in tax isn’t a destination but an ongoing journey of technological evolution. Organisations that begin investing now position themselves advantageously as competitors and tax authorities increasingly adopt these technologies. New AI tools are being developed every day, and the next big wave of interest is expected to come from agentic AI, where AI can interact with humans to collaborate on processes and even support in decision-making.
For tax functions willing to embrace this type of change, AI offers significant opportunities to transform operations, enhance capabilities, and future-proof their value proposition in an increasingly digital world. Such change is often achievable working with other teams and utilising their budgets and brings another opportunity for the tax function to lead the rest of the business in how to embrace and maximise the value from the ongoing technology revolution.
