Tax specialists using AI to handle ‘rising wave of tax controversy’

As global tax leaders grapple with evolving international tax transparency regimes, EY’s 2025 Tax Risk and Controversy Survey of 2,000 senior tax executives found that artificial intelligence (AI) is becoming integral to tax controversy management.

“AI is transforming not just how tax teams work but how they build and reinforce trust with tax authorities,” Luis Coronado, EY global tax controversy leader, said.

“The shift from reactive to real-time engagement is helping both sides move from interpretation to collaboration – bringing greater accuracy, transparency and efficiency.”

Tax leaders are bracing themselves for disputes arising from international transparency regimes, EY’s survey found. Ninety-two per cent of executives surveyed said they expected to see more tax disputes arising from the Organisation for Economic Co-operation and Development (OECD’s) base erosion and profit shifting (BEPS) Pillar Two initiative, which has sought to address international tax loopholes.

Most respondents (90 per cent) also anticipated that fresh transfer pricing and transparency obligations, such as public country-by-country reporting, would spur additional tax controversy.

“Tax controversy is changing shape. New rules, new reporting and new transparency requirements mean the number of disputes is almost certain to rise,” Coronado said.

“Organizations investing early in technology and talent will be best placed to stay ahead of and keep up with this rising wave of tax controversy.”

To manage these emerging risks, 70 per cent of tax leaders said they had already implemented at least one generative AI tool for tax controversy management, while 87 per cent believed AI would improve efficiency and accuracy.

Those who utilised AI tools reported greater satisfaction with their tax controversy management approaches, the survey found. Just under half (46 per cent) of AI users reported being ‘very satisfied’ with their approach, compared to 31 per cent of non-AI users.

Tax leaders are also putting their governance strategies under the microscope as the risk landscape evolves. As international regimes progress, 91 per cent of leaders said they planned to enhance their governance strategies, the survey found.

Overall, only 31 per cent of respondents reported being ‘very satisfied’ with their current management of controversy, indicating room for improvement. EY noted that clear leadership structures, centralised oversight of global disputes and strong data governance would be key to bridging the gap between intention and execution in governance.

“In today’s environment, governance isn’t just a compliance exercise, it’s a strategic advantage,” Joel Cooper, EY Global international tax and transactions services controversy leader, said.

“Companies that effectively combine clear governance with modern technology, empowered talent, and a robust data strategy will manage tax controversy from a position of confidence, not crisis.”