Transforming tax compliance with AI

The tax organization at IBM comprises a high-performing team of tax professionals that supports operations in 170 countries globally. As a multinational corporation, IBM is responsible for complying with tax laws and regulations across various jurisdictions worldwide.

The tax department faced challenges in managing inaccessible and incomplete data, which led to many hands-on processes to manage compliance within tax laws and regulations. The manual process of aggregating and harmonizing large volumes of granular data from dozens of source systems was time-consuming and required substantial human effort and investment. This process amounted to massive workloads as IBM files thousands of tax returns every month, impacting the organization’s ability to allocate resources to more strategic workstreams. Kanthi Morrissey, Chief Tax Officer at IBM, explains: “The biggest roadblock is inaccessible and incomplete data.”

With a strong commitment to innovation, the company’s tax organization aspired to be client zero for IBM technologies—such as the IBM watsonx® portfolio of AI products—and operationalize AI throughout their global tax lifecycle.

The tax organization at IBM collaborated with EY to address the management of inaccessible and incomplete data globally. To overcome this challenge, IBM and EY chose to use the IBM® watsonx.ai® enterprise ready AI studio to create EY.aifor tax, built with IBM watsonx®.

The multimodel library, available to handle a wide array of invoices and volumes in each country, made watsonx.ai appealing for detect-and-correct methods, while IBM watsonx.data®, a hybrid open data lake, helped create a unified data layer from all varied sources. The implementation process involved a multifaceted relationship between IBM, IBM Ecosystem engineering and EY. Morrissey commented, “IBM and EY teams agreed to use the latest technology innovations to improve our business processes. Naturally it made sense for IBM to pilot watsonx®, given the open, enterprise-ready, fit-for-purpose language models we offer with trusted AI.”

The EY organization played a key role as thought partner and facilitator, from ideation and prioritization to solution development and delivery. The IBM Ecosystem engineering “Services Solutions Accelerator” team developed the minimum viable product (MVP) for detect-and-correct use cases. IBM’s tax department defined built-in data controls and reconciliation checkpoints for data flows from each source system, designed to enhance efficiency and deliver a higher-quality data consolidation process.

The collaboration between IBM’s tax department, ecosystem engineering and EY teams has been instrumental in shaping and deploying the solutions. IBM is already seeing improvements in efficiencies and time saved throughout the process. The primary benefits are the augmentation of human capabilities to do large-volume tasks, freeing up skilled employees to focus on more strategic planning to grow the organization.

The tax organization at IBM has achieved a significant transformation in managing inaccessible and incomplete data, thanks to its use of watsonx. Through the implementation of AI-powered solutions—including an intelligent tax data lake, detect-and-correct methods applied to business documents and withholding tax determinations—IBM’s tax department is advancing toward a highly automated tax compliance process. This progress demonstrates that AI can be trained in foundational tax skills and is paving the way for an AI-powered organization prepared for the future of work driven by the AI revolution.

The transformation is helping free human resources to focus on more strategic workstreams. With three use cases already on track to save employees tens of thousands of hours annually from manual, data-intrinsic tasks, IBM is positioned to help achieve significant cost savings and drive revenue growth with EY’s help. By using watsonx.ai, IBM’s tax department has been able to validate unstructured invoice data with high accuracy, while the tax data lake solution has created a unified data layer from various sources across countries globally.

According to Morrissey, “This project is driving a great IBM ecosystem message by bringing the IBM and EY relationship to light and demonstrating how IBM’s generative AI is driving innovation that can be replicated across many business functions.” The success of the MVP has also led to a stronger collaboration  between IBM and EY with plans to collaborate on marketing campaigns and joint assets.

As the advantages of this transformation become more evident to IBM, the company is well-positioned to benefit from new technologies and innovations in the tax space. With their commitment to using AI and automation for IBM to become the most productive company in the world, the tax organization team at IBM is leading the way in business transformation and innovation.

IBM is a multinational technology and consulting company headquartered in Armonk, New York, with operations in over 170 countries. Founded in 1911, IBM has a long history of innovation and a strong commitment to research and development, with a significant investment in AI, cloud computing and other emerging technologies. IBM’s tax department, led by Chief Tax Officer Kanthi Morrissey, comprises a high-performing team of tax professionals worldwide, responsible for managing the company’s global tax obligations and ensuring compliance with tax laws and regulations.