Vertex study finds board gap in indirect tax oversight

Vertex has published research showing that only 16% of enterprises treat indirect tax as a standing item for the board or executive committee. The study also found that just 13% fall into the highest tier of AI maturity for indirect tax and compliance.

The survey of 750 IT, tax and finance decision-makers points to a sharp divide between companies that give indirect tax regular senior-level attention and those that do not. Among organisations where the issue reaches the board at least periodically, 4% said errors are usually identified by external parties, compared with 16% at organisations where indirect tax does not receive that level of attention.

These businesses were also more likely to respond quickly to tax authority notices. Nearly half, or 48%, said they reply within five business days, versus 26% of organisations where indirect tax is not discussed at board level.

Manual processes also remain more common at companies with less executive oversight. The research found that 13% of enterprises where indirect tax is discussed at least periodically at board level make and verify taxability changes entirely by hand, compared with 26% of those where it is not.

The findings suggest indirect tax still sits outside routine strategic oversight at many large businesses, with 43% of enterprises raising the subject only when a problem arises, if at all.

AI divide

The research identified a similar gap in the use of AI and automation. Among enterprises that discuss indirect tax at least periodically at board level, 54% said AI now operates largely autonomously or handles routine work in their tax workflows. That compares with 21% among those that do not.

The study grouped enterprises into four tiers of AI maturity in indirect tax and compliance, based on data and system readiness, enablement, governance and deployment. Only 13% were placed in the highest tier.

That group was far more likely to classify indirect tax as an investment priority. Among IT leaders in the top tier, 85% described indirect tax as a funded strategic priority on the technology roadmap, compared with 5% in the lowest tier.

Automated monitoring of regulatory change also differed sharply between the two ends of the scale. In the highest tier, 55% said they proactively monitor for changes with automated updates, against 9% in the least mature group.

Evidence burden

Despite those differences, the research found a common problem across all groups: proving tax positions. About 52% of enterprises said they take a more conservative approach when they lack sufficient evidence.

Among companies that hold indirect tax reserves, 73% said at least a quarter of the reserve is tied to tax treatments they cannot readily substantiate, rather than to uncertainty in the law itself. This points to documentation and operational issues rather than purely technical tax disputes.

Respondents came from the United States, the United Kingdom, Germany and France, and all worked at enterprises with at least USD $250 million in annual revenue and 1,000 or more employees. The sample covered decision-makers in information technology, tax and finance with influence over indirect tax and compliance technology decisions.

Allison Cerra, Chief Marketing Officer at Vertex, said the gap reflected how companies govern the function. "Indirect tax is one of the few functions where determinations are made continuously, exposure is lasting, but conversations about risk are episodic and after the fact," Cerra said.

"The enterprises running indirect tax best govern it like any other strategic function, as a recurring part of how the business is run, not only when issues surface," she added. "The gap between those two postures is not a matter of scale. It is a matter of attention."

Kevin Permenter, Research Director, Enterprise Applications at IDC, said the data pointed to a broader management issue rather than a simple size effect. "The findings suggest that operational maturity in indirect tax is less about organisation size and more about governance," Permenter said.

He added: "With compliance requirements becoming increasingly continuous, organisations that integrate tax into broader business and technology decisions appear far better positioned to adapt to change, manage risk proactively, and maintain visibility across the compliance lifecycle."