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

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 department's 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 percent 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 work 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 standardized 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 standardization, digitalization, and automation, the initial focus is always on standardization.

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: Standardization 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 centralized data repository is still one of the biggest structural obstacles to digital transformation. The goal of real-time, data-driven decision-making remains elusive in most tax departments, as they lack a centralized hub with direct access to tax-relevant data, or the data is not yet harmonized 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, harmonized 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 standardization and end-to-end data management to enable automation at scale and realize 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 prioritize budget allocation, and enable integrated decision-making across the organizational, 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 prioritizing 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.

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