Study analysing the transformation of the tax function: Let’s Talk Tax 2026

We are seeing a growing number of tax departments rethink their organisational structure, particularly as budgetary pressures increase. Though most still start out with a traditional structure based on tax type, there has been a notable shift toward hybrid models with dedicated roles and teams for different operations. As part of this shift, companies are outsourcing routine, standardisable processes to shared service centres as a medium-term solution, bridging the gap until they have the technology in placeto fully automate them (nearshoring approach: “Centre of Excellence” vs. offshoring approach: to be replaced by automation in the long term). At the same time, companies continue to push ahead with their digital transformation, often supported by outside consultants – though very few can claim to have achieved end-to-end automation to date. Overall, we are seeing the tax function evolve into a hybrid model that focuses on advisory, oversight and governance while outsourcing a substantial portion of their day-to-day operations to meet the changing demands of the role.

There has also been a shift in the way tax leaders see their role: from retrospectively focused, mainly reporting date-driven auditors to an integrated, forward-looking and proactive tax team that adds real value with reliable, consistent support for day-to-day operations. This elevates the status of tax managers to business and value partners – ones who strive to integrate tax issues early and strategically into business operations as a means of safeguarding tax compliance. As a result, the main performance metric for tax department heads is seamless compliance, which goes hand in hand with the departments’ growing relevance as a driving force behind corporate value creation. The extent to which tax functions have embraced this new role varies from business to business, though it will likely be more of a gradual shift as their resources are earmarked for various reporting obligations.

Faced with an increasing regulatory burden – from Pillar 2 and electronic invoicing to real-time reporting and ViDA – our respondents cited compliance as their biggest challenge. And around 20 per cent of the tax leaders we surveyed say they are not adequately prepared for the existing compliance requirements.

The often highly fragmented legacy Tax CMS systems still in use across Germany are rapidly reaching their limits: Many tax compliance operations are still tied to individual countries or tax types, with disparate standalone systems and tools adding to the complexity. As a result, demand is growing for unified, end-to-end management of data, processes and systems that works across national borders while still taking local rules into account. The regulatory burden has in this case become a key driver of digital transformation in the tax function.

The process environment in German tax functions has two sides: While many companies have already standardised and automated most of their VAT processes, they still rely on fragmented, mainly manual methods for income tax, because it occurs less frequently, varies widely in technical scope and is handled on a project-by-project basis. That is why, in the strategic triad of standardisation, digitalisation and automation, the initial focus is always on standardisation. Many of our respondents see ERP conversion as a prerequisite for broader automation efforts, particularly in terms of building a suitable data foundation. In our practice, we are already seeing a trend towards a hybrid automation strategy: Standardisation and automation where it makes sense from an operational and cost perspective, while deliberately choosing manual methods for complex and less frequent activities. 

According to our findings, establishing a centralised data repository is still one of the biggest structural obstacles for digital transformation. The goal of real-time, data-driven decision-making remains elusive in most tax departments, as they lack a centralised hub with direct access to tax-relevant data, or the data is not yet harmonised or available on demand. Our respondents say the quality of the data is often substandard as well, which can lead to time-consuming correction loops. Without a single source of truth in the form of an integrated, harmonised data repository, large-scale automation initiatives are unlikely to succeed. In the long term, the goal will be to create a systems architecture that uses strategic standardisation and end-to-end data management to enable automation at scale and realise the dream of a data-driven tax function.

The tech stacks in Germany’s tax functions are often highly siloed, relying on a patchwork of standalone solutions that make it difficult to evolve their automation initiatives beyond fragmented, task-specific fixes. To achieve the end-to-end automation companies aspire to, the key is to systematically reduce complexity, strategically prioritise budget allocation and enable integrated decision-making across the organisational, data and technology architecture. That is why the platform-centric approach is gaining traction. Its success depends on two essential developments: a consolidated, integrated platform architecture that overcomes system fragmentation, streamlines workflows and incorporates agentic AI. And an upgraded, interoperable digital infrastructure for tax authorities. With this external infrastructure in place, scaling automation finally becomes a reality.

Faced with rapid digital transformation and a new understanding of its roles and responsibilities, the tax function is looking for team members with a broader skill set. Companies are prioritising an innovation-driven mindset, effective communication skills and the ability to collaborate across different corporate units. At the same time, a basic knowledge of process logic, interfaces and IT more broadly is becoming a key qualification in this increasingly data-driven environment.

Digitalisation and automation are not simply drivers of efficiency here; they are a structural response to the limitations of today’s labour-intensive models, particularly when faced with a talent pool that only seems to be getting smaller.