Navigating the shift to an AI-powered tax operating model

Tax sits at an inflection point. AI isn’t just another tech upgrade, it’s changing how tax functions operate. The old ways—slow, siloed, and manual—won’t cut it anymore. Fragmented data, talent shortages, and rising demands are piling on pressure. The good news: AI brings speed, precision, and smarter insights that can help free your team to focus on what matters to the business. Getting the operating model right is mission critical. The question isn’t whether to reinvent it, but how you can make that shift.

Think of the operating model as a blueprint for governing, executing, and measuring tax work. We still have to anchor on strategy, people and culture, data, process, technology, and governance. But AI changes how we pull those levers and, if used strategically, can increase value from your investment across the entire operating model. Here’s how:

• Reimagining workflows to build in speed and smarter controls
  Layer AI onto current workflows and risk leaving value on the table. A fresh perspective and fit-for-purpose design can yield stronger, more adaptable outcomes that serve your needs now and into the future.
• Shifting from a pyramid into a diamond-shaped talent structure
  Traditionally, tax teams have resembled a pyramid, with many junior staff handling routine tasks at the bottom and fewer senior strategists at the top. As AI takes over routine work, the base shrinks, and so does the top with AI-enabled analytics supporting decisions. What expands is the middle: a diamond-shaped core of skilled professionals who interpret AI outputs, create data quality, manage execution, and helps drive strategic business decisions.
  
  This type of structural change requires tax teams to rethink onboarding and training, especially as the benefit of the “learn by preparing” approach dwindles. Programs will vary by organization, but effective approaches balance corporate strategy fluency with digital know-how and tax technical depth. For example, this could include a broader strategy-aligned talent pool plus targeted tax technical and digital training. Scenario-based learning could give junior staff a baseline while challenging them to solve real-world situations. Structured rotations, mentoring, and hands-on exposure to automated and data governance workflows may also accelerate capability development and readiness for governance and execution within the new structure.
• Harnessing data complexity as a strategic asset
  AI-enabled operations require clean, reliable data. Tax-relevant data is often messy and scattered across ERPs and other sources, with ownership divided among several stakeholders—a bottleneck AI can help alleviate. AI-powered tools let tax teams directly interact with raw transactional data from disparate sources and reconcile it to the ledger for completeness, helping align your data ecosystem with tax requirements and transform related processes. Beyond consumption, AI can help maintain data quality and lineage in the future-state operating model, defending data and validating controls as tax authorities deploy their own AI assets to test them. The result is standardized data ready for use across tax, which can facilitate more automated workflows, improved reporting precision , and data-driven insights. But tax cannot go it alone; cross-functional coordination and governance are essential to success.
• Making data, technology, and governance work together to power AI
  Three enablers—quality data, adaptable technology, and disciplined governance—offer a practical framework for capturing AI value. But these aren’t gatekeepers. AI can also strengthen each by helping deliver value even when data is imperfect across structured and unstructured inputs, make your tech ecosystem more flexible and resilient, and enable governance with scalable human-in-the-loop checks. This creates a virtuous cycle that moves you toward a resilient, compliant, and future-ready tax operating model.

The blueprint is just the start. Success means translating strategy into a clear charter and piloting a plan, including how to source capabilities. The decision to build, buy, or blend depends largely on your systems, talent mix, capacity, goals, and budget. Here’s what to consider:

• Build: If your systems are complex and fragmented, and you have a strong, tech-savvy team ready to innovate, building custom AI solutions might be the way to go. This approach can give you maximum control and a tailored fit for your unique environment. But it’s important to be realistic about what you can take on—it requires a major commitment of time, specialized skills, and ongoing investment in infrastructure and maintenance.

• Buy: Need to move quickly? Buying off-the-shelf technology and tapping external specialists can get you up and running fast without the overhead of developing everything internally. It’s a great way to fill capability gaps and offload infrastructure management. Keep in mind, though, that you may need to adapt your processes to fit the third-party approach depending on the services you tap into, which can mean less flexibility and customization.

• Blend: If you’re looking for a middle ground, blending in-house expertise with third-party tech and managed services can help you combine speed with control. This “best of both worlds” approach allows you to leverage existing platforms while building bespoke solutions or governance layers that helps address your specific tax complexities. It’s no surprise that this is one of the more popular path organizations take as they scale.

Each option can impact how fast and effectively you can unlock AI’s value, while managing risk and costs along the way.

Adopting an AI-powered tax operating model isn’t about ticking boxes. It requires a holistic, integrated approach where each level works together. As you plan for transformation, keep these key considerations front and center—they may influence how you navigate complexity, accelerate value, manage risk, and future-proof your tax function.

• Align your talent strategy: Build a team that embraces AI-powered analysis and strategic decisions. Define roles and upskill your people to help foster a culture of continuous learning and collaboration with AI tools.
• Use outsourcing as a strategic lever: Outsourcing can be a smart way to balance cost, effectiveness, and focus. Decide what to keep in-house or delegate based on risk versus value, and leverage scale and automation to boost efficiency and free your team for strategic work.
• Match your approach to complexity: Complex environments often require a tailored build or blend approach. Simpler or more modernized environments may be able to adopt buy solutions faster, accelerating time to value.
• Balance speed and control: Each approach comes with trade-offs. Ready-made solutions can accelerate delivery but may limit customization and control. Custom solutions provide a precise fit but demand more time and resources. Blending offers a pragmatic balance that preserves governance and adaptability while accelerating outcomes.

A tailored operating model powered by AI can turn your tax function into an agile, insightful, strategic powerhouse ready for what’s next.