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Three prominent tax provision trends for 2025

The EY 2024 TARAS survey finds opportunities for tax provision teams to consider for 2025 as they face a shifting tax legislative environment.


In brief

  • The survey highlights how AI is transforming tax reporting through the provision of insights, leading to improved efficiency and decision-making.
  • Organizations need to focus more on reviewing provisions rather than calculations to enhance accuracy and optimize tax processes.
  • Staying proactive on US tax changes and BEPS 2.0 is crucial. Most organizations will need external advisors to verify compliance and avoid penalties.

Preliminary results from the EY 2024 Tax Accounting and Risk Advisory Services1 (TARAS) survey have shed light on several trends that are shaping the landscape of the accounting for income taxes. As organizations navigate the complexities of a changing tax legislative landscape and strive for operational efficiency, the survey highlights key opportunities for tax provision teams. Below are the prominent tax provision trends identified in the survey and how your organization can be better prepared in 2025.

1. Explore AI and automation

Artificial intelligence (AI) is increasingly being recognized as a transformative tool in tax reporting. The survey indicates that many organizations are actively considering the integration of AI into their tax processes. Survey respondents are using and exploring AI for key tax provision processes, including transactional data reviews and tax account reconciliations, in addition to streamlining administrative tasks, such as drafting memos. AI has the potential to streamline tax provisions by automating routine tasks, enhancing accuracy and providing deeper insights through advanced data analytics. In 2025, organizations that successfully implement AI should see significant improvements in efficiency and decision-making, reducing the burden on staff and allowing tax professionals to focus on more strategic activities.

Additionally, for the second consecutive year, increased automation and identifying efficiencies to shorten close cycles remain top priorities for organizations. More than 50% of respondents indicated that quarterly and year-end closes are the most labor-intensive periods. The drive toward automation aims to alleviate the manual workload, reduce errors and expedite the closing process. Organizations that invest in automation technologies will likely achieve faster close cycles, improve accuracy and create a more agile tax function, enabling them to respond swiftly to regulatory changes and business needs.

2. Review allocation of staff time

Actual time spent on provision preparation continues to be an area where improvement is needed. The survey reveals that not enough time is being allocated for reviewing provisions, while too much time is spent supporting calculations. This imbalance can lead to errors and missed opportunities for optimization. In 2025, organizations must prioritize the reallocation of time toward more value-added activities, such as thorough reviews and strategic planning, to enhance the overall quality and accuracy of tax provisions.

3. Stay ahead of legislative and regulatory tax changes

US tax changes and the implementation of BEPS 2.0 Pillar Two continue to be focal points for organizations, with more than 70% of survey respondents noting these two areas for resource prioritization. Preparing for post-election tax reform, operationalizing BEPS 2.0 Pillar Two reporting and compliance, implementing public country-by-country reporting and evaluating sustainability reporting all demand significant attention from organizations. In 2025, organizations will need to stay vigilant and proactive in addressing these changes.

 

More than three-quarters (76%) of TARAS survey respondents indicated they have acted on or are planning for BEPS 2.0 Pillar Two implementation, and more than 80% of respondents anticipate that BEPS 2.0 Pillar Two compliance will require moderate to significant effort. Additionally, 95% of respondents indicated that they anticipate working with an external advisor to perform work related to BEPS 2.0 Pillar Two, including GloBE calculations, transitional safe harbor reviews, and support for technology, process and/or control changes. Tax provision departments must start acting now to stay on top of reporting and compliance requirements to avoid possible penalties and reporting errors.


Summary 

The EY 2024 TARAS survey underscores the key areas that organizations must focus on to navigate the evolving landscape of accounting for income taxes. From leveraging AI and embracing automation, reviewing roles and responsibilities, to staying ahead of legislative and regulatory changes, these trends will shape the future of tax functions. As we navigate 2025, proactive actions in these areas are essential for organizations to enhance efficiency, improve accuracy, maintain compliance and position themselves for success in an increasingly complex tax environment.

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