Tax Management Software Market

Market Overview

The tax management software market size was valued at USD 16.01 billion in 2019 and is presumed to reach USD 27 billion by 2029, with a CAGR of 11.5%.

The tax management software calculates and creates customer-centric statements and invoices for all tax revenue types. The software supports e-billing and integrates with customer account management to register receivables. Furthermore, it provides a complete view of real and personal revenue, including property taxes (real and personal property), maps/GIS information, frozen and current year tax values, exemption tracking, and discovery management, and listing processes. The tax management software offers a broad range of features such as flexible tax configuration, automatic offset, and flexible tax reporting, among others. Surging cases of theft of confidential data hinder the market growth.

Market Dynamics

Rapid Adoption of Digitalization across Industrial Verticals to Drive the Market Growth

Digitalization is an essential technology, adopted across all industry verticals for smooth business operations. Digitalization has not only changed the look of the industry but has created a paradigm shift of the Business Models, affecting numerous fields, sectors, and industries, including Finance Services. The Reserve Bank of India’s (RBI) digital transaction value grew by 19.5 % during 2018–19, compared to 22.2 % during 2017–18, further rising the adoption of digitalization to increase transparency and efficiency of the financial transactions.

Segmental Analysis

Evolving Tax and Accounting Laws to Drive the Software Segment Growth

The software segment is projected to grow with the highest CAGR comparable on account of evolving tax and accounting laws across the globe. For instance, in 2019, Italy implemented the budget law 2020, containing several corporate tax provisions, including a digital services tax and reintroduction of the national interest deduction for capital injection. Furthermore, the software enables organizations to continuously monitor business activities and provide alerts while establishing tax obligations in new places based on individual nexus laws. 

Rising Trade Activities to Drive the Indirect Tax Segment

The indirect tax segment holds the highest market share on account of growing trade activities and supportive government initiatives. Companies are offering umpteen services to the media and entertainment, banking and financial, and healthcare sectors to gain a competitive edge. In 2016, Make in India initiative by the government of India (GOI) enables industry vertical to increase import and export business activities, further rising the adoption of tax management software to manage taxes and determine compliance responsibilities.

Cloud Segment to Grow with a Significant CAGR

The cloud segment is projected to grow with a significant CAGR as it offers high flexibility, scalability, reduction in costs, and high data security, and helps the enterprises to improve mobility and decentralize data storage and computing.

Increasing Business Compliance Cost to Drive the Adoption of Tax Management Software in SMEs

The SMEs segment holds the largest market share on account of a significant surge in the market scenario for faster and cost-effective compliance. For instance, in 2016, the Internal Revenue Service (IRS) estimated that businesses with less than USD 1 million in revenue have to incur almost two-thirds of business compliance costs, compelling the SMEs to adopt tax management software. The SMEs can understate their revenues, overstate their expenses, and underpay their taxes.  

BFSI Segment to Dominate the Market

The BFSI segment dominates the tax management software market on account of surging adoption of process automation to increase customer engagement. Furthermore, an increasing the number of customers using various banking applications is subsequently surging the data interchange in banking and financial sectors, further driving the adoption of tax management software. 

Impact of covid-19

COVID-19 has had a devastating effect on all industry verticals globally. Rapid growth in business operations, post the COVID-19 outbreak, is projected to drive the adoption of the software to determine the current and frozen year tax values. Furthermore, changing taxation policies by various central governments amidst coronavirus outbreak is projected to increase the adoption of tax management software. For instance, in 2020, Saudi Arabia tripled the taxes on essential goods, which is about 15% amidst the COVID-19 outbreak.   

Regional Analysis

Continuous Reforms in Taxes to Drive North America’s Market Growth

North America dominates the tax management software as the region is backed by the presence of prominent players offering tax management solutions such as Avalara, Automatic Data processing, and Intuit. The regional market’s most prominent driver is the continuous reforms in taxes and regulations. For instance, in 2019, the U.S. government announced the change in business taxes, including fuel taxes, further driving the market growth. 

Surging Adoption of Process Automation to Drive Asia-Pacific’s Market Growth

Asia-Pacific is projected to witness the fastest growth in the tax management software market on account of surging adoption of process automation across all industry verticals to increase customer engagement. For instance, in 2018, a multi-state co-operative bank in Maharashtra (India) deployed the Avalara GST compliance system to recognize ITC or generate tax invoices.  

Recent Developments

• In 2019, Avalara acquired Portway International, providing system classifications and outsourced customs brokerage services
• In 2019, The Attilio Group (TAG), a cloud-based back-office solution provider, adopted SOVOS cloud tax management solution to eliminate time-consuming and inefficient tax reporting process
• In 2019, an urban co-operative bank in Surat (India) deployed TaxGenie GST Compliant System to enable GST liability, recognize ITC, and generate tax invoices. Tax Genie provides a customized engine for identification of GST liability, recognition of ITC, and invoice management

Tax Management Software Market Segmentation

By Component

• Software
• Services
  • Training services
  • Consulting and implementation
  • Support services

By Tax Types

• Direct tax
• Indirect tax

By Deployment Mode

• Cloud
• On-premise

By Organization Size

• SMEs
• Large enterprise

By Industry Vertical

• BFSI
• IT and telecom
• Manufacturing
• Energy and utilities
• Retail
• Healthcare and life science
• Media and entertainment

By Region

North America

• The U.S.
• Canada
• Mexico

Europe

• The U.K.
• Italy
• France
• Spain
• Germany
• The Rest of Europe

The Middle East and Africa (MEA)

• Saudi Arabia
• Egypt
• South Africa
• The Rest of MEA

Asia-Pacific

• India
• China
• Japan
• Australia
• South Korea
• The Rest of Asia-Pacific

South America

• Columbia
• Brazil
• Chile
• Peru
• Argentina
• The Rest of South America