The future of indirect tax: Automation and compliance in Europe and beyond

Lianne Bowker, Senior Product Marketing Manager for Indirect Tax at Thomson Reuters, has been closely tracking this evolution. Her insights point to a future where indirect tax is no longer reactive, but rather proactive, predictive and deeply integrated into business strategy.  

Drawing from her expertise, here are five key predictions that highlight where indirect tax is headed and what businesses need to do to stay ahead. 

1. E-invoicing as the new compliance cornerstone 

E-invoicing is rapidly transitioning from an efficiency initiative to the cornerstone of modern tax administration. The real power of electronic invoicing lies not in the digital format itself, but in the unprecedented visibility it gives authorities into business transactions. 

Indirect tax — which includes VAT, GST, and sales tax — is a major revenue source for governments worldwide, especially in regions like the EU, Latin America, and Asia-Pacific. As tax authorities modernize, they’re shifting from periodic reporting to real-time oversight, and e-invoicing is the mechanism making that possible. This shift is also a response to persistent VAT fraud, which costs governments billions in lost revenue each year. By gaining earlier visibility into transactions, authorities can close compliance gaps and recover revenue that would otherwise be left on the table. 

The European Union's VAT in the Digital Age (ViDA) initiative signals a fundamental reimagining of how VAT works. By mandating e-invoicing for intra-EU transactions by 2028 and establishing real-time digital reporting requirements by 2030, the EU is creating a system where authorities have transaction-level visibility before returns are even filed. 

This represents more than a change in format — it's a shift in the relationship between businesses and tax authorities. When governments can see transactions in real-time, the VAT return becomes less a declaration and more a confirmation of what authorities already know. 

By 2027, we anticipate that most major economies will have implemented some form of mandatory e-invoicing or real-time reporting. The clearance model — where invoices must be validated by authorities before being issued to customers— will become the dominant approach globally and take cues from early adopters like Italy, Brazil, and India. 

2. The dawn of pre-filled VAT returns 

Tax authorities are no longer passive recipients of taxpayer declarations. They're becoming active participants in the compliance process, leveraging vast amounts of transactional data to generate pre-populated VAT returns.  

This transformation marks a significant shift from the traditional taxpayer-initiated model — one that ultimately benefits both tax authorities and businesses. However, as with any meaningful change, expect an adjustment period. 

Authority data isn't infallible, meaning businesses will need to react swiftly to identify and address discrepancies between the data on their VAT return and the data in their ERP. Unlike with period audits, this is a relentless process. The most effective way to minimize this reconciliation burden? To ensure source data flowing into e-invoicing systems is clean and accurate from the outset. By focusing on data quality at entry, you'll gain confidence in your compliance position while reducing the time spent on downstream corrections. 

This shift to pre-filled VAT returns is already visible across Europe. Spain's Immediate Supply of Information system now generates draft returns based on real-time invoice data. Italy uses its comprehensive e-invoicing platform to pre-populate periodic VAT liquidations. Hungary's real-time reporting system creates draft returns that businesses must verify rather than create from scratch. 

By 2030, we predict that self-prepared VAT returns will become relics of the past in most advanced economies. Instead, tax departments will focus on reconciliation, exception handling, and explaining discrepancies between authority-held data and internal records. 

3. AI and genAI reshape tax functions 

Artificial Intelligence isn't just coming to tax departments — it's already here. The question isn't whether AI will transform tax functions, but how quickly and dramatically this transformation will occur. 

By 2026, we predict that AI will handle the majority of routine tax compliance tasks in large enterprises. Data validation, anomaly detection, reconciliation of pre-filled returns, and even drafting of responses to authority inquiries will increasingly be performed by intelligent systems rather than human tax professionals. For example, ONESOURCE Indirect Tax uses AI to automate up to 95% of indirect tax processes. 

This doesn't mean tax professionals will become obsolete — quite the opposite. As AI handles the routine, tax experts will be elevated to more strategic roles. They'll focus on planning, policy analysis, and managing the increasingly complex relationship with tax authorities. 

The rise of Generative AI in particular will create new possibilities for tax departments. By 2028, we expect to see GenAI systems that can draft technical positions, analyze the impact of proposed legislation, and even negotiate with tax authorities in routine matters. 

4. Indirect tax governed by systems, not just laws

Perhaps the most profound shift underway is the transition from tax compliance governed by laws and regulations to compliance embedded within digital systems and processes. This represents nothing less than a reimagining of how tax works in the digital age. 

The concept of Continuous Transaction Controls (CTC) will become the dominant model for indirect tax administration by 2030. Under this approach, tax calculations, reporting, and potential audits occur in real-time, with compliance embedded in transaction processing rather than treated as a separate activity. 

This systemic approach to tax administration will blur the lines between business operations and tax compliance. ERP systems, e-commerce platforms, and payment processors will incorporate tax logic directly into their workflows, with real-time connections to tax authority systems. 

5. Tax goes full-stack 

To thrive in this new landscape, businesses must develop flexible, scalable tax technology infrastructures. The tax technology stack of the future will look dramatically different from today's often fragmented solutions. 

By 2029, leading organizations will have implemented fully integrated tax platforms that connect seamlessly with both internal systems and external authority platforms. These solutions will feature: 

The companies that invest in these capabilities now will gain significant advantages in efficiency, risk management, and strategic insight as the pace of change accelerates. 

Despite the march of automation, the human element in tax will remain crucial. The tax function of the future will require professionals with a unique blend of tax expertise, technological literacy, and strategic thinking. 

By 2028, we predict that leading tax departments will be staffed by multidisciplinary teams that include traditional tax experts working alongside data scientists, process engineers, and technology specialists. These hybrid teams will be equipped to navigate the increasingly complex intersection of tax law and technology. 

The transformation of indirect tax is not some distant future — it's happening now, and accelerating rapidly. Forward-thinking businesses are already preparing for this new reality by: 

The businesses that embrace these changes will find that tax compliance becomes not just more efficient but more valuable — providing insights that inform business strategy and create competitive advantage. 

The future of indirect tax is digital, automated, and integrated. The question for businesses is not whether to adapt to this new reality, but how quickly they can transform their tax functions to thrive in it.