AI is pervasive – yet nine in ten companies still reconcile their VAT manually

Fragmentation means that a single sale may be recorded in several systems, such as the ERP system, the tax engine and the e-invoicing platform. Before a VAT return is filed, a company has to check that invoices, VAT amounts and credit notes match across those systems.

That work is still largely manual. In Sweden, 27% professionals surveyed carry out reconciliation entirely manually, and a further 60% partly manually. Only around one in ten have fully automated the process.

Among Swedish respondents who use more than one system, 88% say manual reconciliation noticeably adds to their workload. It is therefore no surprise that reconciliation is the task most Swedish indirect tax teams surveyed want to automate over the coming year: 57%, compared with 47% across Europe as a whole.

Yet automating workloads may not be that straightforward. Some of the key barriers to investing in technology or AI most often cited by Swedish respondents are budget constraints, data security concerns, slow implementations and a shortage of in-house skills, each mentioned by half of the respondents. Four in ten also point to legacy systems that are incompatible with new technology.

The pervasiveness of systems fragmentation coupled with manual reconciliations means that indirect tax teams have less time available for strategic work that adds value to the business.

AI use is widespread, but it is still mostly passive. The most common applications are summarising regulatory updates and detecting anomalies. The more transformative capabilities are used far less frequently: fewer than one-quarter of indirect tax teams in Europe have deployed agentic workflow automation — the capability with the highest operational leverage.

As our report points out, capabilities such as predictive audit risk modelling, AI-assisted classification and agentic workflow automation all require deliberate configuration and data governance, as well as a commitment to change management. Those IDT functions that are leveraging these more advanced capabilities already are bringing more value to their organisations.

The influence of the indirect tax function extends well beyond the VAT return. Two in three Swedish respondents say their function has influenced decisions on pricing or margins over the past year. Yet only 23% believe they make a significant contribution to their organisation's overall objectives.

Partly this could be due to a lack of measurement. The most common measures of success among Swedish respondents are still filing returns on time and the accuracy of filings, and only 13% measure the return on their investment in indirect tax technology using formal metrics.

The result is an influential function whose contribution is not visible enough, which makes it harder to secure budget, resources and access to senior leadership. Our report points to a way forward: respondents who say their function makes a significant contribution are more likely to have adopted AI proactively, engaged regularly with the C-suite, measured ROI formally and used regulatory change as a catalyst for transformation.

Indirect tax leaders are recommended to spend more time on activities that add value to the business, and on making that value visible. A simple starting point can be a quarterly ROI dashboard, reported to the CFO, covering hours saved on reconciliation, error rates, filing cost per jurisdiction and the time from a regulatory update to implementation readiness.

Pressures on indirect tax teams are growing as e-invoicing and digital reporting regulations are being adopted at a rapid pace.

From 1 July 2030, the EU's ViDA (VAT in the Digital Age) package of reforms will require e-invoicing and digital reporting for cross-border trade between businesses within the Union. Several EU countries, including France and Germany, are also introducing their own specific requirements. In Sweden, a government e-invoicing inquiry is due to present its findings by November 2027 at the latest.

For companies operating across the EU, this means VAT data will need to be correct at the point of transaction, leaving far less room to correct errors afterwards during month-end reconciliation.

Many Swedish indirect tax teams still have some way to go to prepare for these changes. Only one in ten respondents in our survey say their company currently complies with e-invoicing requirements in one or more jurisdictions, while almost one in five have not yet started with formal planning. A recent ViDA Readiness Report by Thomson Reuters painted a similar picture: only 21% of Swedish tax and finance professionals felt well prepared in terms of integration between e-invoicing and VAT reporting systems and the quality of their master data.

This is why e-invoicing and digital reporting should be treated as an organisation-wide transformation rather than a compliance project. If done well, the benefits of this transformation go beyond compliance: seven in ten Swedish respondents in our survey cite improved data quality, and as many cite better audit readiness.

Here are some ways that IDT function leaders can simultaneously modernise, upskill and deliver greater strategic value with the same level of resources:

AI is already in the room. The next step is to move it from a supporting role to genuine automation of high-volume processes, and that depends on connected systems, reliable data and clear governance. Companies that use the upcoming government mandates to build those foundations will be better placed to remain compliant while freeing up capacity for higher-value work.