Two key areas shaping the evolving roles of in-house tax professionals are e-invoicing mandates and artificial intelligence (AI). Ray Grove, head of corporate tax and trade for Thomson Reuters, knows all about these developments. Tax Executive’s managing editor, Sam Hoffmeister, interviewed him in January to glean some of Grove’s expert insights.
Sam Hoffmeister: We’re seeing governments increasingly considering tax reforms to grow transparency around compliance with digital reporting. E-invoicing mandates are a good example. What challenges do new regulations bring for multinational businesses?
Ray Grove: You can break challenges into a few key areas. One, for a lot of organizations, there’s always the challenge of understanding impact. “So, I’ve got a new regime requirement that’s coming.” Maybe you’re aware of it, hopefully you’re aware of it, following Tax Executive and other publications and making sure you’re staying abreast of things. But understanding the impact on your organization is not always simple. The requirements are complicated, and challenges can be significant. The other aspect, once you understand the implications and the impact, is “What can I do about it? How will I meet this need?” All these needs—especially when we talk about real-time reporting going more from a look-back to a look-forward tax process, creating that transparency—also create, for lots of organizations, license-to-operate issues. Information is becoming more real-time, more detailed, and now we’re getting to the heart of every transaction in every business, the invoice, and saying, “I need to see that information. I need total and complete detail.” In some cases I need to be able, in a clearance model, to approve that transaction prior to two parties actually executing on it. That creates a lot of system challenges, too. You’ve got the overall finance and digital transformations for many organizations that have been sitting on archaic [technological] solutions in parts of their business. But you also have these compliance obligations. Those are two separate but very related challenges. When we look at the revenue generated by tax and the role that plays in society, that real-time compliance, that transparency, and that real-time tax collection become much more prominent. Over eighty countries have announced e-invoicing mandates. A lot of organizations have very disparate, regional approaches to solving the e-invoicing problem, which for tax professionals and IT professionals, and really the whole organization, creates multiple challenges. It doesn’t have to. There are better ways.
E-invoicing results from a problem—the tax gap, the VAT [value-added tax] gap. Those mandates are coming because regimes have evolved, technology has evolved, economies have evolved. You have four prominent cases in the US Supreme Court right now: Moore v. United States, Loper Bright v. Raimondo, Farhy v. Commissioner, [and] Connelly v. United States. These are big deals. And if you unpack them, these cases are being brought because economies have changed. The way businesses operate has changed. You look at things like the changes coming out around [Section] 174. OK, so I hire a contractor to do the thing; sometimes that contractor needs to hire a contractor. We have a much more dynamic economy. So, regulators are trying to keep pace, and in some cases they’re getting ahead of where businesses and corporations and taxpayers are ready to meet them. So, there’s catch-up. I think regulators are ahead of where business systems and businesses are in their ability to meet some of those standards, but they have to get there. The reality is a big gap of transparency does exist, and our tax code, in many areas, isn’t really built for today’s economy.
Hoffmeister: How big a challenge will the increase in e-invoicing mandates be for US-based businesses?
Grove: Most of my customers are multinational corporations. Thomson Reuters services the biggest of the big, the most complicated. I think I’ve gotten a unique appreciation by talking to many very large multinational customers that have taken a regional approach in solving this problem, which is not unusual. What we’re seeing now is because it’s being rolled out around the globe, it’s fundamentally changing the way businesses operate. Although we don’t have US e-invoicing obligations and standards today, many of these organizations are based out of the US, headquartered out of the US, and there’s lots of cost and risk to having a very decentralized, fragmented process around such a core piece of your business operations and your compliance globally. Now that major market economies are coming on board, organizations are saying, “OK, I’ve been playing Whack-a-Mole. A mole comes up, I whack it down. Another comes up, I whack it.” Now they’re also saying, “How do I approach this holistically so I can operate my business through one approach, one channel, and find that efficiency?” Because it’s really critical, right? It’s not just about tax compliance; it’s also about accounts receivable. Accounts payable automation is a big piece of it. If you look at getting the VAT reclamation, these are massive amounts of an organization’s balance sheet, like thirty percent just sitting there. There’s a big cash flow implication. It’s tough enough to go through an ERP (enterprise resource planning) system migration and a finance transformation. But if you do that without having tax as a strong seat at the table, saying, “This is what we need to do,” you’re going to suboptimize all those investments the organization’s already making. I think they’re waking up to see, “Hey, we need to do more here.”
Hoffmeister: The US is set to adopt corporate global minimum tax via the OECD Pillar Two rules this year. How will that impact US multinationals?
Grove: The simplest way to look at it is multinationals pay more taxes in countries where they have customers and less in countries where they have headquarters, employees, and operations, fifteen percent or higher. Everything always starts out as very, very simple. But, although you start with a base of everybody agreeing, “Yes, we need all of these things,” navigating the actual complexity for corporate tax departments in multinationals, it’s a much bigger, expanded level of data management and preparation to meet these requirements than I think people fully understand. And that’s where, for us, we’ve invested obviously in this space, because you have to have technology as part of the solution. If you try to do this just with subject matter expertise and good old grit, you’ll create a lot of risk for your organization.
It’s another area where tax and technology merge to meet some of these needs. That’s the theme of all this, right? The regimes put requirements in place, which they see as perfectly reasonable, because they’re like, “Oh, well, you have all of this data. You understand where you’re at and where you’re operating, and this is easy. You’ve got to have a data lake somewhere.” They don’t know it’s a data swamp. That’s where tax professionals come in, and they support these things and try to make it better. One thing I’ve been talking a lot more with my customers about has been: a single source of truth in the process. Because tax has been a post-business activity process for so long, it has always been the receiver of broken processes, which means broken data and data challenges. This transformation, whether it’s e-invoicing or Pillar Two or any of these new requirements, is the opportunity to truly operationalize tax within business. It’s critical that tax doesn’t just step up to the plate, but pounds their fist on the table to say, “We need to be part of this, or we’re going to create risk.”
Generative AI in Corporate Tax
Hoffmeister: What do you see as the key benefits of generative AI in corporate tax?
Grove: The most obvious—to anybody who even casually uses generative AI in day-to-day work—is there’s a ton of potential to improve efficiency, accuracy, compliance. Generative AI is a very big topic, but it’s also very specific. I look at it holistically. AI, machine learning, generative AI, even things like edge computing, they’re all things we deploy in our offerings, but it’s really about “How do we drive some of that efficiency? How do we drive more predictable outcomes? How do we make the tax professional of the future more of a judgment expert than a subject matter expert?” Tax professionals in corporate tax departments—at the end of the day, you’re not there to grind through spreadsheets; you’re there to make decisions, to exercise judgment. It’s no secret, the long hours and the challenges of tax—there are probably more soccer games, happy hours, and birthday parties missed by tax professionals than by anybody in any other profession. It’s a lot of burden. The thing is, it’s like folks who work in elections. The deadline’s the deadline. The requirements don’t change. AI can solve a lot of those key business challenges, reducing the administrative day-to-day work volume, and give rise to hopefully what is truly more fulfilling work, advising. Because that’s what’s needed out of the tax department: What can we do to deploy tax strategies?
Hoffmeister: Could you expand on how generative AI might impact how corporate tax professionals work?
Grove: I think—and this is a bigger statement—there’s going to be a transformation of what you do in-house versus what you outsource. You’re looking to outsource more advisory-natured services, I think, in the future. When you start automating business processes, and you create that truth in process, that creates the truth in data. Completing your corporate tax returns and using technology to do that, and where you use your providers versus outsourcing, all of it—I think that dynamic is likely to change in coming years. Having armies of folks crushing through tax returns, I think that’s a big part where that kind of work—important, not necessarily low-value, let’s say maybe mid-value work—is going to evolve, where lots more gets automated. That’ll be a big shift, but also a big shift in opportunity and the conversations you have with your advisors. Because now you can have a leveled-up conversation versus “We’re rushing to a deadline, and I’m trying to get you the information you need, and I’m trying to understand what that means.”
On Tax’s Evolving Role
Hoffmeister: Final question. What’s the most important issue currently facing in-house tax and accounting?
Grove: I think the biggest issue today is a lack of resources. When I present to people, I usually ask, “Who thought when they stepped into that first day of college, ‘I’m going to be a tax professional?’” Nobody ever raises their hands. I think part of that is an unfortunate historical stigma of what it means to be a tax professional. I consider myself a tax professional, but I see myself and my team and our organization as needing to be sherpas in the sense of leading the way to what tax professionals look like in the future. The biggest challenge is getting people to understand tax and technology, that to be a taxologist, you need to be technologist in tomorrow’s world. Regimes are moving to absolute transparency, to a look-forward tax system, not a look-back system. They’re moving to “If you’re not complying, you’re not operating.” So, the bar is getting raised on the impact tax has on a business and its fundamental operations. The role of tax is being elevated, whether tax likes it or not, to be more of that judgment expert, less of that subject-matter expert, and more people who can think through a systems approach of “How am I going to design the systems and processes to make sure I can create a good tax operation for my organization?” A lot of people are probably like, “Well, who can I trust? What technology can I trust?” The profession is changing; regimes are changing; technology is changing. It is all changing. We always say “change, change, change” and “this is more change than ever before.” I would challenge anybody to say that there hasn’t been a tipping point of change in the last couple of years when you start looking at where businesses are, where economies are, where regimes are, and how all that’s playing together.
Hoffmeister: That’s a great way to end it. Thank you so much for your time, Ray.
