TEL AVIV, Israel (PRWEB) March 31, 2022
In a first-of-its-kind report published yesterday, Deloitte and Team8 identify tax technology (TaxTech), as a significant vertical that is currently growing and developing in the fintech industry. The Emergence of TaxTech - A New Era of Fintech report maps out more than 100 startup companies in the global TaxTech space, segmented by tax solution and target audience, and provides an overview of relevant companies and their developments in various domains.
The global fintech industry experienced unprecedented growth in 2021, with companies in the space raising more than $140 billion, three times more than in 2020. This growth is apparent in the high number of public offerings and new unicorns that surfaced in the past 12 months across a wide range of verticals including insurance, loans and payments. The report’s findings point to TaxTech as the next breakthrough fintech vertical, largely due to the proliferation of new financial services in the market and the fact that taxation is intrinsically linked to nearly all financial decisions.
The report details examples of available tax technologies and reviews possible applications that may deliver tangible efficiency gains for individuals, businesses and regulators. It also highlights investors’ appetite for the space. In the past year, investments in TaxTech solutions worldwide increased from $240 million in 2020 to $864 million in 2021.
Taxes impact the lives of people and companies’ bottom lines. Recent trends, such as digitalization, the rise of cryptocurrencies, the massive surge in ecommerce and the gig economy all have massive tax implications that are driving TaxTech innovation.
The research revealed two dominant sub-trends within the nascent TaxTech space. First, and in line with the broader embedded finance trend, TaxTech companies are beginning to offer APIs that empower third party platforms to provide tax-as-a-service solutions. An embedded tax offering could enable better compliance, and help companies support customers within their ecosystem by facilitating a more holistic tax experience.
Second, there is a notable interest in new technologies aimed at improving reporting processes for crypto traders and regulators - as evidenced by the fact that over one third of the money raised by TaxTech companies in 2021 went to crypto-focused tax startups.
Due to the growing complexity of tax codes along with increased demand for real-time data and reporting by tax authorities, tax compliance has become more burdensome for individuals and businesses worldwide. Existing tax processes, which are primarily manual, are unsuitable for the digital era – especially considering numerous evolving global trends that each carry complicated tax implications. For example, wide scale remote working arrangements and the rapid expansion of the gig economy have given rise to a new class of professionals spread across different jurisdictions, resulting in cumbersome tax requirements for both workers and employers alike. Similarly, in the e-commerce industry, which is enjoying a pandemic-driven boom period, online sellers who transact across borders must now contend with different tax frameworks that vary from country to country, and with growing complexity to ensure compliance with all applicable requirements. And as the crypto space continues to attract more mainstream traders, regulators are focusing on the issue of taxation and reporting of crypto assets. These are just some of the trends that have prompted fintech companies to turn their attention to the tax sector.
“Tax season in the digital era has become a huge challenge for individuals or businesses who are burdened with gathering and filing tax statements spread across a multitude of financial apps, banking services, and other platforms,” said Ronen Assia, Managing Partner at Team8. “It’s time for a new breed of tech-driven solutions tailored to the ever-changing contours of the global economy. Our report with Deloitte showcases ways in which fintech-led innovation and the embedded finance trend can simplify and streamline tax services, while creating a far more pleasant – and even beneficial – experience for taxpayers across the board.”
Amit Harel, Partner, Co-leader, and Head of Services Multinational Corporations at Deloitte Catalyst, said, "We’re pleased to put the spotlight on one of the fastest growing areas in the global fintech industry – TaxTech, which we believe will have a significant impact on our clients. Innovation within the TaxTech field is particularly interesting, as three forces are coming together – taxpayers (businesses and individuals), startups and regulators. In the near term, we predict that various tax apps will become valuable to enterprises and individual filers, not only as a necessity, but also as a business driver. At Deloitte, we are constantly researching, incorporating, and building breakthrough technologies to optimize and streamline our tax offerings. We promote innovation in this field and are also engaged in development of solutions, tools and platforms, as well as creating relevant alliances and joint business offers with players in the market. We look forward to partnering with the Israeli ecosystem, as we predict it will have a key role in the continued development of TaxTech."
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Team8 is a venture group that builds and backs cutting-edge technology companies in the fields of cybersecurity, data and fintech. Team8 rethinks venture to provide entrepreneurs with an unfair advantage, bringing expertise, experience and resources to accelerate success in an increasingly competitive landscape. Its extensive network of global leaders uniquely positions Team8 as the venture partner of choice with a deep understanding of industry-wide challenges. For further information, please visit http://www.team8.vc.