Technology Diffusion in Tax An Examination of Tax

Technology Diffusion in Tax: An Examination of Tax Analytics and Automation Routinization Robin Pennington, Al Chen, Jennifer Dirienzo, Kathy Krawczyk North Carolina State University

Agenda • Motivation • Theories of Technology Diffusion • TAA Diffusion Study & Hypotheses • TAA Diffusion Research Methodology • Results • Limitations and Suggestions for Future Research 2

Motivation Corporate tax reporting tasks • Complicated and Detailed oriented • Time-consuming • Data accuracy and Filing timeliness required • Rule-based 4 IR technologies • Automate routine, repeatable processes • Align tax practices with long-term business strategies 3

Diffusion of Technology Innovations Application of innovative technology creates business value (Zhu Kraemer, and Xu 2006) Technology diffusion stages: • Initiation • Adoption • Routinization 4

Technology Diffusion Process Uses technology-organization-environment (TOE) framework developed by Tornatzky and Fleischer (1990) Zhu et al. (2003, 2004, 2005, 2006) identify TOE factors • Technological context • Technology readiness/competence, Technology integration • Organizational context • Firm size, global scope, managerial obstacles • Environmental context • Competition intensity/pressure, Regulatory environment 5

TAA Research Model Adopted from Zhu et al. 2006 6

Technological Factors of TAA Routinization Hypothesis 1: Technology readiness is positively related to TAA routinization Hypothesis 2: Technology integration is positively related to TAA routinization 7

Organizational Factors of TAA Routinization Hypothesis 3: Managerial obstacles are negatively related to TAA routinization. 8

Environmental Factors of TAA Routinization Hypothesis 4: Competition intensity is positively related to TAA routinization. Hypothesis 5: A supportive regulatory environment is positively related to TAA routinization. 9

TAA Diffusion Study • Analyze TAA technology innovation usage at the firm level. • Our study surveyed tax directors in Fortune 1000 US companies 10

TAA Diffusion Survey Respondents Number of Employees among Survey Respondents 0 5 10 15 20 25 30 35 40 45 50 <500 500 -1000 -5000 >5000 missing 11

TAA Diffusion Survey Respondents Survey Respondent Title Others; 3% [CATEGORY NAME], [VALUE] Missing; 4% VP of Tax; 31% Chief Tax Officer; 3% 12

TAA Diffusion Survey Respondents Tax Analytics and Automation Technologies Adopted 7% 24% 10% 59% Automating repetitive / rule-based tasks Data mining (e. g. , tax data exploration, fraud detection) Mimicing human decision making (e. g. , AI) Other 13

Integrating TAA in Business Processes Tax Provision Tax Compliance 0% Not Significant 10% 30% 40% 35% Fairly Significant 32% Very Signficant 9% 3% 0% 5% 10% 15% 20% 25% 30% 45% 50% 10% Somewhat Significant 47% Fairly Significant 25% Very Signficant Don't Know 35% 6% Slightly Significant 15% Somewhat Significant 50% Not Significant 6% Slightly Significant Don't Know 20% 9% 3%

Integrating TAA in Business Processes Tax Strategy Tax Planning 0% 10% 20% 30% Not Significant 24% Somewhat Significant Very Signficant Don't Know 50% 43% Slightly Significant Fairly Significant 40% 24% 0% Not Significant Slightly Significant Somewhat Significant Fairly Significant 3% Very Signficant 1% Don't Know 6% 10% 20% 30% 40% 50%

Descriptive Statistics 16

Scale Reliability of Constructs 17

Linear Regression Analysis 18

TAA Routinization Study Results • Technology integration with the databases and information systems of the company and its business partners supports TAA routinization • Managerial obstacles hinder the degree of TAA routinization that the tax department can achieve • Favorable regulatory environment has a significant positive impact on TAA routinization in tax processes 19

TAA Routinization Study Implications • Adapt the TOE framework to analyze TAA usage and value creation • Show TOE context factors influence TAA routinization • involving tax department personnel in all major upgrades to a company’s databases and information systems • providing flexibility (reducing management obstacles) in evaluating organizational changes of integrating TAA into the strategy and business processes of the company • Taking advantages of the favorable regulatory environment to develop robust TAA processes in their tax department 20

Limitations & Suggestions for Future Research • Expand to capture the TAA technology diffusion in firms that are smaller with fewer resources • Increase the sample size to support additional analyses 21

Thank you! Q&A

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