Tax technology health checks – tax processes, data and systems in a reality check

From target process to the reality of systems – why is a tax technology health check necessary?

This health check examines whether and how tax requirements are actually reflected in the existing system landscape. 

In particular, it assesses whether data flows, system logic, and process steps consistently support the intended objectives, or whether gaps exist between the conceptual design and the technical implementation. Especially within structures that have evolved over time, processes are often supplemented by manual interventions, breaks in media continuity or inconsistent data models. These kinds of divergences are often hardly visible in day-to-day business but have a considerable effect, whether as an increase in the need for coordination, limited data quality or tax risks.

In addition, a lack of transparency regarding data origins, responsibilities and system logic can further complicate the assessment of tax-relevant matters. This not only increases the likelihood of errors, but also the effort required for validation, corrections and coordination between the various functions involved.

That is why a Tax Technology Health Check intentionally considers tax processes not only from a top-down perspective — i.e. from the viewpoint of policies, process descriptions, and target operating models — but also incorporates a bottom-up perspective. It asks: What does the process actually look like from the perspective of systems and data? At which points is information generated, processed, or modified? Where does technical reality align with defined requirements — and where does it diverge?

This perspective is essential, as it goes beyond assessing abstract process definitions and makes the actual tax process reality within the organisation visible. Only this comparison provides a realistic understanding of how processes are truly implemented in practice. At the same time, it highlights discrepancies between conceptual design and technical execution, thereby creating a fact-based foundation for targeted optimisation measures.

Create transparency, determine the action to take and set up your tax processes for the future

Just as important as identifying weaknesses is uncovering concrete optimisation potential. A Tax Technology Health Check highlights areas where tax processes are unnecessarily complex, error-prone, or resource-intensive. In many cases, the root cause lies not in the conceptual design itself, but in its inconsistent or incomplete implementation across underlying data structures, system logic, and interfaces. Where tax-relevant information is not consistently available, where processes rely on manual workarounds, or where the technical representation of responsibilities and control steps is fragmented, inefficiencies arise that often remain unnoticed in day-to-day operations.

The fact that there is still a considerable need to act at many companies is also shown by the Tax Technology Study 3.0, which we published in collaboration with Lünendonk: despite many claims to have digitised, many tax functions are still working with temporary solutions based on Excel, while at the same time things like e-invoicing, data quality and a failure to structurally ground tax technology are increasing the pressure to transform yet further. These findings particularly highlight how important it is to have a structured view of data, systems, processes and responsibilities.

A structured health check systematically identifies existing weaknesses and translates them into concrete areas of action. It highlights where data needs to be harmonised, processes streamlined, system logic adjusted, and responsibilities more clearly defined. This not only creates a better understanding of the actual tax process landscape but also a solid basis for prioritised improvements. As a result, companies can move beyond isolated fixes and instead develop their tax processes in a targeted and sustainable way.  

A central element of the assessment is to determine the level of automation of tax processes and the degree of system support already in place.

Therefore, as part of the health check the level of maturity of the automation of the tax processes is assessed. This evaluation systematically captures the current state of automation and make it comparable. Based on specific cases, it illustrates how automation is typically implemented in similar scenarios and what additional value further automation can deliver. The implementation effort and need for maintenance requirements are not quantified in financial terms but assessed qualitatively across the categories low, middle and high, and contrasted with the respective marginal benefits. This analysis is deliberately kept neutral and is based on common best practice approaches. It provides a structured foundation for decision-making, without anticipating specific implementation.

At the same time a tax technology health check makes an important contribution to strengthening collaboration between the tax function, finance, IT and the operational departments. It is precisely these interfaces that determine whether a tax process works effectively in practice or whether friction, coordination efforts, and control gaps arise. Particularly in light of audits, governance requirements, and increasing digitalisation initiatives, such a transparent view of actual process implementation is becoming ever more important. Companies that not only define their tax processes but also regularly review their technical implementation and continuously develop them create greater transparency, enhance manageability, and future-proof their tax function.

From the picture of processes to a roadmap for action

A tax technology health check is usually carried out in several consecutive steps that build on each another. The objective is not only to understand the target tax process but above all to make recording it in data, systems and interfaces transparent and to derive concrete improvements from it.

1. Defining the scope and goal
The initial phase focuses on clearly defining the scope of the assessment by identifying the relevant tax processes, systems, data flows, and interfaces. In parallel, the strategic priorities are set—such as improving transparency across the process landscape, uncovering technical weaknesses, and preparing for future digital and governance requirements.

2. Recording the actual situation
The second step is to record how the tax processes are actually carried out. This not only considers process documentation and role models but also the operational implementation in the relevant systems, data structures, interfaces and manual steps.

3. Analysis of gaps and vulnerabilities
Based on this it is examined at which points technical reality diverges from the target picture. Typical issues are media continuity, manual workarounds, inconsistent data models, unclear responsibilities and inadequately supported controls. 

The level of the maturity of automation is also assessed here in order to assess to what extent processes are currently being conducted manually and where it would be possible to render support from systems or to automate.

4. Deriving definite action
The identified gaps are then translated into specific areas for action. These include adjustments to data structures, system logic, function and authorisation policies and collaboration between the tax function, finance and IT.

5. Prioritisation and roadmap
Finally, the optimization initiatives are prioritised by relevance, risk and implementability and put into a practicable roadmap. This creates a solid basis to further develop the tax process landscape in a specific, structured way for the long-term.

Identifying where action is needed, future-proofing

A tax technology health check provides companies with the opportunity not only to react to specific issues, audit findings or costly manual corrections but also to address them at an early stage. Those who understand their tax processes from a data and systems perspective are better positioned to reduce risks, minimise coordination efforts and establish robust structures that are fit for the future.

This makes a tax technology health check far more than a simple snapshot. It provides a solid foundation for defining concrete initiatives, setting clear priorities and developing the tax function in close collaboration with finance, IT and the operational departments. In an environment of increasing regulatory requirements and advancing digitalisation, this becomes a critical success factor.

The supplementary analysis of the level of automation further enhances this transparency by enabling a realistic evaluation of the current state of development without anticipating specific implementation decisions.

Companies seeking to gain transparency over their actual implementation should not postpone this reality check, but act at an early stage.

Combined health check

A technology health check for the tax function is highly relevant, as tax processes today are increasingly driven by technology, data and systems. In essence, it helps ensure that the tax function is operates effectively, efficiently and in a compliant and future-ready manner. In this respect, a tax technology health complements existing tax health checks. As data forms the foundation for informed decision-making, combining the various health checks is not only possible but strongly recommended.

Outlook for the next health checks

Read more about the following subjects in coming articles in our Health Check series:
• Data protection
• Withholding taxes
• Transfer pricing
• International tax law
• Insurance tax
• Health checks in the public sector 

Also read:
Our health checks so far and the health check hub.