What Role Does AI Play in Bringing Efficiency to the Tax Industry?

Interview with Felix von der Planitz

Recent technological advancements have shown that introducing automation can help companies cut down on routine tasks and give their employees the ability to focus on what’s most important in the day to day.

Whether it’s AI-powered automation or digitalization of a whole set of processes, companies need to adapt to the new normal and start incorporating tools that make their daily work more efficient.

This is especially true in the ever-evolving field of tax and finance, that’s what the Co-CEO of ACE Alternatives and Head of ACE Tax, Felix v. Planitz, strongly believes.

Felix has over 20 years of experience working in the world of finance. Before ACE Alternatives, he was part of PwC Deutschland, which is the leading auditing and consulting firm in Germany.

Many experts in the tax field claim that incorporating AI tools has significantly improved the efficiency of tax and accounting, while others believe there’s much more work that needs to be done to fulfill the specific needs that the market has.

To explore more about this topic, we sat down with Felix and asked him about the trends of AI-driven solutions revolutionizing the tax field, the current needs that the market has, and ways to fulfill the talent gap with the use of new AI-powered technologies.

Enjoy the read!

Hello, Felix! Thank you so much for sitting down for this interview.

Let’s start by talking about trends: How do you foresee AI-driven solutions revolutionizing the tax processes?

“Firstly, it is important to mention that doing business and building tools in the tax industry requires a highly data-driven approach for it to be effective.

That being said, different tools that encourage standardization, automation, and digitalization in the tax processes will have a massive impact on development in the industry.

The current trend of Artificial Intelligence is bringing Large Language Models (LLMs) to the forefront, which, in practice, are mostly used for generating content and doing research on specific topics.

Of course, there are ways to implement generative AI tools in everyday processes, but automation and digitalization tools are essential for making these processes streamlined and efficient.

For example, when it comes to tax compliance and sourcing documents, introducing automation could be critical to eliminate human error and detect inaccuracies, resulting in saved time and higher efficiency for everyone involved.

These types of optimizations could lead to improving internal processes, increasing team productivity, and identifying new opportunities to enhance client relationships and grow business.”

How Does the Whole Industry Need to Adapt from Excel Databases to Allow the Integration of AI?

“In their general workflow, tax advisors receive a huge amount of data daily to work with. An interesting trend is that the amount of data they receive has immensely increased over the past 20 years.

At the same time, expectations of customers to get responses on their issues in a fast manner have also increased tremendously.

That’s why it’s important to make the processes more efficient and automated to accommodate the current needs that the market has. As times passes, the amount of data will only increase, while the time to respond to a customer request should be shorter to match the need.

Despite these market demands, bigger companies and organizations tend to be slow to introduce new processes and automate their work. But, of course, it is important for them to adapt to the “new normal” and get familiar with these new technologies.”

It’s a well-known fact that there is a talent gap in the tax field. How has this fueled the development of such tax-tech solutions?

“Yes, there is an ongoing trend of talent shortages in the tax and finance fields. This is due to the fact that there are fewer people entering this industry, while at the same time many professionals are retiring.

In fact, students getting a bachelor’s degree in accounting or similar fields has fallen by 7.8% in 2022. Fewer qualified young professionals in the industry means that businesses must come up with other ways to fill the gap that is created by an aging workforce.

The obvious solution to this problem is all about embracing new technologies and innovative tools to digitize and automate processes to balance the situation and ensure continuity of business for companies operating in the tax industry.

As I stated earlier, the amount of work that needs to be done is increasing, and without adopting new AI technologies and solutions, it will be challenging to improve efficiency and make important, data-driven decisions in an effective manner.”

What are some key functions that the market requires, that modern tax tools don’t provide?

“Over the past few years, we have seen quality solutions being developed that mostly cover the individual tax space. We currently lack solutions in the more complex areas of taxation.

For example, in the world of corporate tax, integration of taxes across multiple jurisdictions and entities is still a challenge.

Consolidated tax returns represent complex operations and there is a clear need to develop technology that will streamline the process.

Other than that, I believe the whole financial industry would benefit from acquiring new solutions. The industry needs to adapt to ensure that there’s one single source of truth. This can lead to creating a database, which could be used by different stakeholders involved in the process of accounting, DSG, compliance, and so on.

The challenge is that the financial services industry has become increasingly complex over the last 30 years. There are more complex, multiple-tier structures, funds of funds, hedge funds, and others, which require tools that are up-to-date and respond to the specific needs of each organization.”

Finally, how does tax-tech adjust with the ever-evolving compliance requirements and regulations in different countries?

“In general, tax compliance and tax law are becoming increasingly complex. So, there is a clear need for transparency in the overall processes.

It is important that the technology is adapted to local regulations, yet local regulators should pay close attention to see what the specific needs are that organizations have.

Technology has to bring tax expertise and automation together to simplify different tax functions, such as compliance and reporting.

For that, solution providers must pay close attention to the complexities of concurrent regulations and offer tools that will simplify the overall process.”

ACE Alternatives helps you streamline your tax processes like never before!

ACE Alternatives is developing tax technology that fund managers and LPs can use to fully optimize tax reporting with end-to-end services.

But what does the tax reporting optimization mean exactly?

Let’s break it down. This technology can assist your team to:

• Organize communication with fund administrators, accountants, and tax consultants.
• Check up-to-date reports and insights to make more informed decisions.
• Automate administrative tasks to reduce errors, simplify the process, and save time.
• Get an overview of every critical fund event to ensure smooth operations.

API-based data transfer allows real-time tax data sync from the accounting software. The tool also tracks your real-time accounting data, which ensures accuracy and compliance with every single update.

Sounds interesting? Have a look at their page more more info.