From cost to compliance: The trends driving tax leaders to choose outsourcing

"There’s a lot of change in the world. We are in the eye of the storm in tax with einvoicing, Pillar 2 and global trade reform. When Deloitte produced its last report in 2023 change was on the horizon, now it’s here and people are feeling it,” says Chris.

Change is making tax tough, so it’s no surprise that 86% of respondents said they use some form of outsourcing for at least one tax process, up from 69% in 2023. It means more than four out of five leaders are now looking outside their own department to deal with the added complexity.

The report was published just days after Deloitte’s finance outsourcing, including Tax Operate, was recognised as a leader in Gartner’s 2025 Magic Quadrant.

Bringing together the results from a survey and interviews with tax heads, it captures the current mood and mirrors, says Chris, what we’re seeing daily.

When it comes to the benefits of outsourcing, reduced operating costs tops the list (68%).

For the tax and finance leaders surveyed, outsourcing proved the most popular strategy for cutting costs in the tax department – it scored 81%, up from 69% two years ago.

But, as Chris points out, the 'low-cost option' tag isn't always the most cost-effective way. 

"The low-cost option is often misunderstood by other stakeholders who want the ‘cheapest’ solution. The comparison should be between how much would it cost me to do this in my own tax team versus how much would outsourcing cost me, things like access to the latest technologies, flexibility and scale and subject matter expertise should all be factored into the equation.” says Chris.

“If your company has operations in 10 countries, you’re dealing with tax compliance in each one, and every return in every country is different. So, you might need 10 professionals who know all the rules, as well as the technology which is often country-specific.

“When you weigh up employment, training and technology costs, is it a better option to have an outside expert do it for you? It’s not about a low price; it’s about proportionality and adding value.”

“We’re definitely seeing people use outsourcing when there’s so much volume, but they need to get it done. When you overlay Pillar 2 on top of everything else tax directors are dealing with, it’s a lot.” 

Complying with laws and regulation emerged as the main challenge facing tax and finance leaders in the next three to five years.

In total, 40% of respondents put this in their top three challenges, with 13% naming it as their number one.

“We’re now in the world of Pillar 2 and I think it’s vexing everyone because it’s new, it’s complex and it’s global,” explains Chris. “So, the trend towards outsourcing is no surprise.

“If one of the reasons people use outsourcing is access to specialist knowledge, then this is as specialist as you get. Until now, we’ve applied local rules in local countries to file local returns. We’ve become very good at putting a global wrapper around it to give clients a centralised view, but we’ve still been dealing with local rules. Pillar 2 is different.

“E-invoicing has also become a really hot topic, again because it’s new. A lot of companies just want us to help them get up and running.”

“You want to be able to look your CFO in the eye and let them know you’ve got this under control.” 

Fifty-seven percent described AI skills as 'essential' for today's tax workforce.

All 1,000 survey respondents identified an area where the rollout of this technology is a top priority. And when it comes to in-demand skills, AI and data capabilities head the list, with AI a new entrant this year.

This is a big topic for tax departments but Chris stresses that no matter how powerful the AI might be, it isn’t a magic wand. To get the right results, you must have the right data.

“What we sometimes see with Operate is people outsourcing to us hoping we can fill the void, but if the data isn’t in the system already, AI can’t put it in.

“Often tax directors will say, ‘if only I had a data person in my team, everything would be solved.’ But the intervention to improve it needs to happen earlier.”

The evolution in reporting is requiring more granular data from company finance systems that may never have been designed with tax in mind.

“The gulf in data quality has increased in recent years and I think Pillar 2 has brought it to a crescendo,” continues Chris. “We add the most value when clients understand that and recognise it as an opportunity to improve the information they capture – they are the ones that benefit most from outsourcing in the data world.”

“You can't just bring AI along and solve everything. It's a journey.”

Access to talented tax professionals is another issue facing leaders – more than a third listed it in their top three challenges.

The expectation of hiring freezes or budget constraints was also the biggest factor challenging resourcing levels in the next two years (53%). And hiring becomes particularly complicated when looking for talent with both tax expertise and other skills, like AI.

“Tax has definitely become much more specialist,” says Chris. “I started in a world where all of the tax legislation was in just one or two books and as tax professionals we covered a broad spectrum. Now, because of globalisation, tax directors have experienced a massive increase in legislation and need specialists in different areas.”

“Also, technology has changed how we work. We used to have people sitting in the UK entering numbers into software and preparing the tax return. We don't do that anymore; there’s an automation aspect to it.

“I'd say, now, we’re much more focused on parts of the tax code rather than maybe 20 years ago, when it was the whole of the tax code. That creates a lack of familiarity and probably a desire to hand things to somebody who really knows what they’re doing.”

“I think globalisation and technology have changed the basic tax training journey – there are much more specialist areas now.”

Cost constraints is a constant theme of the report – when naming their top challenge, respondents said getting adequate budget was as concerning as compliance.

It’s an issue that also runs through Deloitte’s latest quarterly CFO Survey. Published in April, it shows finance leaders’ focus on cost control has risen to its highest levels outside of the early days of the pandemic. Strategies are defensive while risk appetites are low.

And global uncertainty isn’t helping. Tax has been consistently in the headlines meaning leaders are having to manage stakeholders and make sure their organisations are up to speed.

Chris explains: “Tax people are on a bigger stage now and geopolitics have made the tax leader far more important. It’s about risk management and making sure you comply, but it’s also about how you do business. Tax departments need to be right in the middle of it all.”

Translating this complex landscape for clients is at the core of our Tax Operate service – and the rise in businesses exploring outsourcing points to the many positives.

As Deloitte’s Global Outsourcing Survey 2024 highlights, outsourcing relationships are increasingly about value.

For Chris, the most successful client relationships are two-way, with both parties challenging each other and working together.

“With the very best examples, you’d find it hard to differentiate between the client and our people sitting at the centre of it, because they’re doing it jointly,” Chris says. “Everyone recognises that there's a lot of volume involved, but they'll work it out together.  

“There are few KPIs because we’re all looking for ways to get more value for money from what we’re doing, rather than focusing on price. That’s when outsourcing works best – when it’s a team.”

“Once, finance happened and tax was the bit that came at the end. Now tax is a massive influencer.”

If you would like to find out more about our Tax Operate service, please get in touch.