27/09/24

BEPS: 88% of corporate leaders view generative AI as key to navigating Pillar Two challenges, KPMG report finds

Techmonitor reports today that Generative AI (Gen AI) is being increasingly recognised by corporate leaders as a crucial tool for navigating the challenges introduced by the Organisation for Economic Co-operation and Development’s (OECD) Pillar Two initiative, according to KPMG’s “Tax Reimagined 2024” report.

The survey, which includes insights from 500 CEOs, CFOs, and chief tax officers, revealed that 88% of executives believe generative AI is vital in managing the complexities brought on by the OECD’s global minimum tax regime, which came into force in January 2024.

Investment in AI capabilities is also on the rise, with 98% of respondents planning to invest in AI or generative AI within the next 12 months. Of these, half expect to allocate between $500,000 and $1m for these investments. This reflects the increasing reliance on AI to enhance the efficiency and effectiveness of tax functions, particularly in improving compliance, automating workflows, and reducing costs.

KPMG argues generative AI viewed as crucial asset among CFOs

Among respondents to KPMG’s survey, Pillar Two’s compliance requirements were seen as a significant financial burden, with 86% of respondents agreeing that compliance would be costly for their organisations. To address these challenges, generative AI is viewed as a key solution. According to the report, 46% of executives believe AI can automate workflows, 42% see its value in streamlining tax compliance activities, and 40% expect it to aid in cost optimisation efforts.

The influence of generative AI extends beyond its operational benefits, reshaping how tax departments approach talent acquisition and management. Over half of the respondents (53%) now prefer to hire technology experts who can learn tax, rather than tax experts who can develop technological skills. This marks a 12-point increase since 2021, underscoring the growing importance of technology in tax functions.

Generative AI also appears crucial in transforming the strategic role of tax departments within organisations. The report highlights that 90% of C-suite leaders now recognise their tax departments as key contributors to building stakeholder trust. By leveraging AI tools, tax departments are expected to provide greater transparency and more strategic insights, reinforcing their value to the organisation.

“Chief Tax Officers are leading their organisations into an era of opportunity,” said KPMG tax vice chair Rema Serafi. “Using data, tax departments can exert their strategic influence and continue driving stakeholder trust.”

Level of generative AI adoption a key factor in partnering with new suppliers

In addition to operational and talent management impacts, generative AI is also influencing the use of managed services in tax functions. The report notes that 87% of respondents are more willing to adopt comprehensive managed services models, with over half already utilising outsourcing, co-sourcing, or managed services to handle regulatory disruptions like Pillar Two. It found that 79% of leaders said a third-party provider’s investment in generative AI would influence their decision to use that provider’s services, highlighting the growing role of AI in outsourcing decisions.

KPMG’s report also notes that generative AI is expected to bring profound changes to the tax function, with 51% of respondents anticipating that AI integration will result in transformative or revolutionary changes in the near future.

Furthermore, 86% of leaders agree that AI tools will help supplement the talent needs of their tax departments.

The report also touches on the importance of data management, with 95% of executives agreeing that better-leveraging data across the organisation will help tax departments anticipate future challenges and influence smarter business decisions. However, only 60% of tax departments report regularly using data to inform decision-making, highlighting a gap between aspirations and reality that could be bridged through AI-powered solutions.

In another recent report by KPMG, dubbed the Future of Risk report, it has been found that organisations are increasingly adopting AI and advanced technologies to transform risk management strategies. This report identified AI and generative AI as the most commonly adopted tools for addressing new risk challenges. As the risk landscape becomes more complex, AI is seen as essential for filtering data, identifying trends, and delivering actionable insights, as per the KPMG study.