New Delhi: A significant majority of Chief Financial Officers (CFOs) and finance and tax leaders in India believe that generative AI (GenAI) will greatly enhance the effectiveness of their tax functions, according to a recent study released on Thursday.

The EY Tax and Finance Operations (TFO) Survey 2024 conducted globally indicates that 87 percent of leaders worldwide share this belief, pointing to GenAI’s potential to revolutionize tax functions across the globe.

Insights from the survey, which involved 1,600 leaders across 32 countries and 18 industries, including 70 CFOs and tax leaders from leading Indian corporations, identified key challenges facing the tax and finance domains.

Growing Confidence in GenAI’s Potential

The survey highlights that an impressive 94 percent of CFOs and finance and tax leaders in India now believe that GenAI will significantly improve their tax functions. This marks a dramatic increase from just 19 percent in 2023, showcasing a growing recognition of GenAI’s transformative potential in the tax landscape.

Progress in GenAI Adoption

Furthermore, the 2024 survey reveals that Indian tax leaders are making tangible strides in their GenAI journey. Approximately 14 percent are currently developing strategies, launching pilot projects, and exploring early-stage GenAI applications.

Another 47 percent are in the exploratory phase, actively investigating and experimenting with GenAI’s capabilities to enhance operations, surpassing the global average of 40 percent.

Transformative Applications of GenAI

Rahul Patni, Digital Tax Leader at EY India, emphasized that GenAI is emerging as a powerful tool for tax professionals, capable of transforming work environments and enhancing productivity.

He stated, “Areas of application can range from AI-assisted document reviews to data cleansing and drafting business deliverables for routine matters. This advancement will enable tax professionals to work more effectively, concentrate on strategic priorities, and make informed decisions.”

Barriers to Adoption

Despite the optimism surrounding GenAI, the survey found that 44 percent of respondents cited challenges such as a lack of skilled talent and limited understanding of GenAI’s capabilities as key barriers to effective implementation.

Routine Tasks Consume Valuable Time

The survey also revealed that 46 percent of respondents in India—and 45 percent globally—spend their time on routine tasks like data collection and tax return preparation. These tasks are believed by Indian tax leaders to require no more than 20-25 percent of their time, allowing for an increased focus on strategic initiatives.

The Pressure on Tax Teams

Jitesh Bansal, National Leader for Tax and Finance Operations at EY India, noted that as regulatory and reporting obligations become more demanding, tax and finance functions are experiencing greater strain.

“Tax teams will need to step out of their comfort zones and tackle new challenges related to tax function strategy, process optimization, data quality, audit readiness, and other issues,” Bansal stated.

Adapting to New Working Methods

The survey underscores a notable trend: the collaboration of tax skills with data and technology skills is becoming increasingly vital.

However, it is crucial to recognize that the industry is experiencing significant talent pressure at the same time, complicating the landscape further.