A lack of resources in corporate tax and global trade departments could expose business to a wide range of risks, according to research by Thomson Reuters. Its report suggests that under-resourced tax departments are more likely to face audits and penalties, with departments having to deal with the data-intensive demands of today’s import and export trading environment – including new requirements to collect ESG data to comply with local laws – adding complexity, and reputational risk.

The research found that half of corporate tax departments (47%) admit they are under-resourced for technology, resources and hiring, particularly in firms with revenue of US$50m to US$6bn. Almost three-quarters (72%) of businesses with under-resourced tax departments incurred a tax audit in the previous year, compared to 61% of overall tax departments. Half (47%) also incurred tax penalties, with an average value of US$40,000 – double the median penalty of US$20,000 incurred by all tax departments. Technology is ranked as the most effective way to reduce risk (17%), ahead of improved quality control and hiring more headcount.

Similarly, one-third (33%) of global trade professionals feel that their departments are feeling the pinch from understaffing and lack of budget. In addition to lack of resources, they identify one of their biggest challenges as increased disruption, notably from inflation, supply chain, international conflicts, and regulatory changes.

Ray Grove, head of product, transactional compliance, at Thomson Reuters, said: “There’s significant optimism about the potential of automation and generative AI to boost efficiency and support future growth, but tax and trade professionals are facing barriers to unlocking this potential. Specifically, they’re feeling under-resourced in terms of technology budget for their departments, as well as headcount to be able to achieve their goals. This is not only tempering the success they can have – it’s also bringing risk and increasing the likelihood, and cost, of penalties that they’re facing.”

Improving efficiency is top of the list of priorities for tax departments (32%), followed by acquiring additional software (14%) and automation of processes (12%). Reflecting on the past year, one-quarter (23%) said their team was most proud of its automation of processes through the implementation of new technology or software.

Short-term resourcing priorities for the next one to two years see introducing automation favoured as the highest priority for tax departments, with 51% ranking this ahead of increasing efficiency (46%) and growing headcount (34%).

For global trade, the months ahead are set to bring greater need for compliance, with shifting and new regulations coming in across the world. Alongside challenges brought by inflation and supply chain shortages and disruption, almost half (46%) of trade professionals see retaliatory tariffs being the area most likely to impact trade. The UK’s new Custom Declarations Service (43%) and China’s Export Control Law (36%) are the other key factors that professionals feel may impact trade operations for corporate businesses.

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