For finance and tax leadership, establishing clear and transparent data access channels has always been critical—they need information from all parts of the organization to effectively perform their functions. However, data silos have historically been a challenge for tax professionals, and they often lack the available budget to address this issue. Daren Campbell, EY Americas Tax Technology and Transformation Leader, says that the dual push of new regulations and new technologies is changing this landscape: new tax requirements such as Pillar 2, or changes to standards from bodies like the U.S. Financial Accounting Standards Board (FASB), combined with the urgent need to integrate more automation into finance processes, are giving leaders more reason to secure the necessary funding.

"Tax departments often leverage topics like Pillar 2 when building business cases for executive leadership, saying, 'We need to report far more data than ever before, and we must find a way to respond,'" Campbell said. "That's why they are getting some of the budget and funding to advance their data capabilities."

New regulations bring new awareness

Breaking down tax data silos is more critical than ever, especially as new regulations like Pillar 2 increase the volume and complexity of data required by tax teams. An EY survey released in November shows that although 86% oftax and finance leaderslist AI, technology, and data as key priorities, 45% of respondents noted that the inability to execute "sustainable" plans around these three areas is the biggest obstacle to achieving their vision and goals for the tax function.

However, these increased reporting requirements are also prompting companies to have "greater recognition" of the tools and information requested by tax departments. Campbell said that leaders in other areas of the business are beginning to understand that "this is a need of the tax department; otherwise, there is risk from failing to meet certain reporting deadlines."

Campbell has worked at EY, one of the Big Four accounting firms, for nearly three decades. According to his LinkedIn profile, he assumed his current role—Tax Technology and Transformation Leader—in July 2022. Since November 2018, he has also led the EY Americas Tax Innovation Council, which consists of 37 tax professionals dedicated to "instilling a culture of innovation at EY."

As tax and finance leadership prepares for new regulations, EY observes more companies beginning to revisit their data strategies, building "data lakes" or "data hubs" to make information centrally accessible. This includes exploring how to apply AI and automation in the tax domain. But Campbell believes there are currently two main obstacles preventing companies from reaching the "transformation stage" of AI—the stage where AI creates significant change. The first is data silos, and the second is process issues. He said: "To fully leverage AI, you can't just embed AI into existing processes; you need to think differently."

"For example, in a manual process, you might need six layers of review, but with AI, due to its consistency and other insights, perhaps only two layers or even one layer of review is needed," Campbell said.

Tax and the CFO

Tax leaders are under pressure to further apply AI within their functions. As regulatory requirements increase, companies need to invest more, but "there is a general expectation that AI will significantly reduce costs, and compliance costs will decline," Campbell said. "So tax departments feel this pressure, and arguably, it also transmits to tax service providers."

One way to alleviate the pressure is to gain the support of the CFO. Campbell observes that tax departments "have not done an excellent job of articulating the value they can bring to the enterprise." Despite increased discussion around tax as a strategic element, the function "is often viewed as a pure compliance cost center."

Campbell says EY has worked with tax leaders to shift this perception, helping them "make compelling business cases to the CFO for why tax needs to be included from the early stages of projects," such as in ERP transformations and similar initiatives.

On the CFO side, ensuring that the tax department has a seat at the table in decision-making is crucial. Campbell said: "Although tax is typically a downstream activity, the events that trigger tax all occur upstream. Therefore, the more tax can participate in overall transformation discussions—whether it's ERP transformation, supply chain adjustments, or procurement—the more value it can bring to the enterprise."