Navigating international indirect tax and regulatory compliance
Why indirect tax professionals feel the squeeze (and what can be done)
With shifting international trade dynamics and the relentless pace of digital transformation, staying compliant is less like hitting a stationary target and more akin to walking a tightrope on a windy day.
A recent survey conducted by the Thomson Reuters Institute with indirect tax professionals across the United Kingdom, Germany, Canada, and the United States shines a spotlight on this global “squeeze.” While the pressures may differ regionally, there’s a common theme: regulatory compliance remains a significant and persistent challenge.
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The universal pressure point: Regulatory compliance
United Kingdom: Squeezed for resources
Germany: Precision and complexity
Canada: Balancing regionalism and automation
United States: Navigating state-by-state complexity
Charting a way forward: Strategies for UK indirect tax teams
The universal pressure point: Regulatory compliance
Globally, 43% of indirect tax professionals list “regulatory compliance” as a core challenge. This isn’t merely an abstract issue, it leads directly to increased workloads, the constant need to keep up-to-date with changes, and higher risk of penalties. A closer look at the survey data reveals a nuanced landscape in each jurisdiction, with the U.K standing out in key areas.
United Kingdom: Squeezed for resources
- Here in the U.K, 50% of indirect tax professionals say “regulatory compliance” is their biggest obstacle. Post-Brexit changes to cross-border trade have increased complexity on this front. The recent discussions around easing the “unnecessarily high” regulatory burden on the City of London further underscore this point.
- The most acute challenge in the U.K, however, is “resource constraints” (68% versus a 43% global average). Many are attempting to manage a demanding regulatory environment with insufficient staffing.
- Upskilling teams is a priority for 66% of professionals, with 53% also aiming to enhance existing technology solutions.
Germany: Precision and complexity
- 73% of German professionals cite regulatory compliance as their chief challenge.
- A notable 28% desire greater “harmonisation of tax regulations,” showing a drive towards simplification amidst tangled legal frameworks.
- German teams are also the most advanced in technology adoption (31% with robust tech already in place) and most enthusiastic for AI tools (73% expressing strong interest).
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Canada: Balancing regionalism and automation
- In Canada, 57% of respondents identify regulatory compliance as a leading concern. The layered system of federal and provincial taxes, as well as unique rules in Québec, add complexity.
- The top challenge for Canadians is “technology and automation,” with 60% citing it as a hurdle.
- 43% seek increased automation and use of AI, while 36% want further regulatory changes.
United States: Navigating state-by-state complexity
- 54% of US professionals call “regulatory compliance” their primary challenge, facing a patchwork of state and local taxes which require constant adaptation.
- “Technology and automation” are prominent issues for 58% of respondents; “resource constraints” remain a factor for 43%.
Charting a way forward: Strategies for UK indirect tax teams
Given this complex landscape, what should U.K. indirect tax professionals focus on to ease the squeeze?
- Accelerate the use of technology: For many British teams, investment in automation and data management is no longer optional. Automating routine processes, adopting robust systems, and exploring AI can free up critical capacity and minimise errors, especially with the growing complexity of cross-border and digital services post-Brexit.
- Upskill the team: The U.K stands out for its resource constraints, making it vital to invest in building knowledge particularly in analytics, regulatory change, and tech proficiency. This meets the shift in the profession from operational process roles towards more strategic, advisory positions.
- Advocate for regulatory clarity: There remains a pressing need for clearer, more harmonised regulations, not just within the U.K., but in international dealings. Engaging with professional bodies and government consultations can help drive change, while internally, maintaining strong lines of communication between tax, finance, and operations is critical.
- Prioritise data integrity: Smart compliance starts with accurate, accessible data. With “data management” identified as a challenge by 38% of professionals globally, ensuring data quality must be at the forefront of any compliance strategy.
Thriving on the tightrope
U.K indirect tax professionals are certainly feeling the squeeze, caught between the rising tides of regulatory complexity, technological change, and limited resources. But the data also offers hope: those who embrace digital transformation and invest in upskilling will not only remain compliant but also add strategic value to their organisations.
As the Thomson Reuters 2025 survey: Managing change in indirect tax and compliance makes clear, the future of indirect tax compliance in the U.K is digital, strategic, and collaborative. The real question is not whether change is coming, but how quickly and effectively British teams can adapt to maintain balance on this ever-shifting regulatory tightrope.