The global tax management market is projected to grow from USD 21.0 billion in 2022 to USD 35.1 billion by 2027, with a Compound Annual Growth Rate (CAGR) of 10.8% over the forecast period.
Key factors driving this market growth include the continuous rise in digital financial transactions and transformations, increasing complexity of tax regulations, the growing adoption of emerging technologies for tracking taxpayers, and stringent government tax collection policies. These factors present lucrative opportunities and improved service delivery prospects throughout the forecast period.
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Software segment to continue with the larger market size during the forecast period
Tax management software facilitates the completion of tax returns for companies operating across verticals. It provides automated tax compliance with local accounting legislation and standards. Organizations across the globe have started adopting tax management software to keep up with the rapidly changing regulations and shifts in product taxability. Tax management software is experiencing an increasing demand pertaining to the ever-evolving tax and accounting laws across countries. There has to be enhanced software that can consider all of the regulatory needs and compliances put forward by the authorities of various regions. This is of utmost importance and provides alert(s) while establishing tax obligations across regions, and countries based on their nexus laws.
SMEs to record a higher CAGR during the forecast period
The increasing complexity of tax compliance has forced SMEs to adopt advanced tax management software. Cost-effectiveness is an important need for SMEs, as limited budgets always constrain them. This, in turn, leads to restricted ways adopted by SMEs to market themselves and gain visibility. SMEs have come a long way in enhancing strategic approaches including, but not limited to, service offerings, filing and reporting compliance requirements, levels of tax understanding, tax obligations complexity, and rapid changes in business ecosystems/environments. For instance, IRS (Internal Revenue Service) estimates that businesses with less than USD 1 million in revenue are to incur almost two-thirds of business compliance costs. Such costs are larger, related to revenues or assets, for SMEs than for large enterprises. Additionally, due to the complex tax codes, SMEs can understate their revenues and overstate their expenses, thus underpaying their taxes.
Manufacturing vertical to hold the second-highest market size during the forecast period
Manufacturing firms are an integral part of the supply/value chain. Hence, manufacturing firms must run smoothly so that the value chain will be stable. Globalization, eCommerce, and product shipment have reduced the gap between manufacturers and consumers. Nowadays, manufacturers have extended their market reach, resulting in more revenue and increased taxable products and services. The challenges faced while calculating tax for a manufacturer include selling to retailers or resellers, product-wise taxability, shipping or delivery, installation, and repairs. Hence, the process of tax calculation is complex and needs continuous observation. Manufacturers need to pay fines for any missing or invalid certificate. Tax management solutions can greatly help manufacturers better handle exempt or taxable transactions. Avalara and ClearTax are some of the companies providing tax management solutions to manufacturing companies.
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Unique Features in the Tax Management Market
One of the standout features of the tax management market is the growing complexity of tax laws and regulations. As governments implement more intricate tax policies, businesses are compelled to adopt advanced tax management solutions to ensure compliance.
The market is also being shaped by the rapid digitalization of financial transactions. With businesses increasingly conducting operations online, tax management solutions are evolving to handle large volumes of digital transactions across multiple platforms.
Another unique feature driving the tax management market is the integration of innovative technologies such as artificial intelligence (AI), blockchain, and machine learning (ML). These technologies enhance the ability to track taxpayer activities, automate tax calculations, and improve the accuracy of tax filing and reporting.
The enforcement of strict government tax collection policies is another defining characteristic of this market. Governments around the world are increasingly adopting stringent regulations and oversight mechanisms to ensure compliance and reduce tax evasion.
The combination of growing tax complexity, digital transactions, and technological advancements is creating significant opportunities for enhanced service delivery in the tax management market.
Major Highlights of the Tax Management Market
This rapid growth underscores the increasing demand for advanced tax management solutions as businesses seek to navigate the complexities of tax regulations and digital financial transactions.
A key highlight is the increasing complexity of tax rules and regulations, which is pushing companies to adopt sophisticated tax management systems. As tax laws become more intricate and vary across regions, organizations need efficient tools to ensure compliance and avoid potential legal issues.
The ongoing shift towards digital financial transactions is another major driver in the market. As businesses expand their online operations and embrace digital payment systems, the volume of financial data to be processed has increased exponentially.
The adoption of cutting-edge technologies such as artificial intelligence (AI), machine learning (ML), and blockchain is revolutionizing tax management. These technologies are enhancing automation, improving accuracy in tax reporting, and offering predictive insights into tax liabilities.
The introduction of stricter government tax collection policies and compliance mandates is a prominent factor driving market demand. Governments are enforcing more rigorous tax regulations to increase transparency and reduce evasion, leading businesses to invest in reliable tax management solutions.
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Top Companies in the Tax Management Market
The tax management market comprises major providers, such as Thomson Reuters (Canada), Intuit (US), H&R Block (US), Avalara (US), Wolters Kluwer NV (Netherlands), Automatic Data Processing (US), Sovos Compliance (US), SAP SE (Germany), Blucora (US), Vertex (US), DAVO Technologies (US), Sailotech (US), Defmacro Software (India), Xero (New Zealand), TaxSlayer (US), TaxCloud (US), Drake Enterprises (US), Canopy Tax (US), TaxJar (US), Webgility (US), Taxback International (Ireland), LOVAT Software (UK), SafeSend (US), EXEMPTAX (US), Sales Tax DataLINK (US), SAXTAX (US,) and Shoeboxes (US).
Intuit :
Starting with Intuitwas founded in 1984 and is headquartered in California, US. The company offers financial management and compliance solutions and services. Small businesses and self-employed, consumer, and strategic partners are the three business partners of the company. QuickBooks, TurboTax, Mint, Credit Karma, ProSeries, and Lacerte are the specialized products of Intuit. It has offices in countries including the US, Canada, India, Israel, Australia, and the UK. The consumer segment includes products and services such as TurboTax, TurboTax Online, and TurboTax Live. Lacerte, ProSeries, ProFile desktop, and ProConnect Tax Online are its flagship products and services in the strategic partner segment. Intuit offers its solutions in both ways, online and desktop. The online offerings are also accessible on mobile devices, enabling users to utilize services at any time from a mobile location.
Thomson Reuters :
founded in 2008 and headquartered in Toronto, Canada, offers news and information-based tools to organizations and professionals globally. In a strategic partnership with The Blackstone Group Inc, Thomson Reuters sold its 55% stake in the Financial & Risk (F&R) business for about USD 17 billion and restructured its business by introducing new consumer-focused segments. It operates through three business segments: Recurring, Transactions, and Global print. The tax professionals segment serves tax, accounting, and audit firms. The corporate segment includes corporate customers and offers them a full suite of offerings. The company provides its tax and accounting solutions to accounting firms, corporations, financial institutions, governments, and law firms. Thomson Reuters offers its tax and accounting solutions in more than 15 countries across North America, Latin America, Europe, the Middle East & Africa, and Asia Pacific regions.
Wolters Kluwer :
Founded in 1968 and headquartered in Alphen aan den Rijn in the Netherlands. The company is a leading provider of software solutions and services for professionals belonging to tax, finance, audit, healthcare, risk, compliance, and regulatory sectors. It operates through segments including digital and service subscriptions, print subscriptions, transactions, and legal and financial services, among others. It serves customers from more than 180 countries across the globe. It has 93% of Fortune 500 companies as its clients. Tax and accounting is a leading contributor segment in the company’s revenue. According to its 2021 results, it generated 79% Recurring Revenues. The company reported revenues up 6% to USD 6.3 billion, organic revenues up by 5%, and included solutions for compliance, collaboration, internal and external audit management, corporate performance management, and firm management. Accounting firms, corporate finance, tax and auditing departments, and government agencies are some of the major customers of tax management solutions provided by the company. It has operations in 40 countries across the globe.
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