The tax software industry is projected to expand significantly, with an anticipated increase from US$ 20.95 billion in 2022 to US$ 46.90 billion by 2030, reflecting a compound annual growth rate (CAGR) of 10.6% during this period.
The accounting sector is experiencing rapid growth, which is driving the demand for innovative technologies to enhance tax-related processes. For instance, the International Trade Agency (ITA) reported that in 2020, the value of US accounting service exports to Canada was US$ 335 million, while imports from Canada amounted to US$ 450 million. The entire accounting landscape is undergoing a transformation due to the rise of cloud computing and automation, which are pivotal in the ongoing digital revolution. Cloud accounting has significantly changed the way accountants perform their daily tasks and interact with clients. With cloud-based solutions, accountants can manage their work from virtually anywhere. According to Xero Corporation, firms utilizing cloud accounting have seen a 15% increase in year-over-year revenue, and those employing these solutions can serve five times more clients compared to traditional methods.
There is a growing trend among accounting firms to adopt artificial intelligence (AI) technologies to enhance productivity and advance the industry. The integration of sophisticated tools aimed at improving efficiency and facilitating better decision-making is expected to gain momentum in the near future. AI technologies can provide deeper insights and help reduce operational costs for accounting firms. As reported by the Sage Group, 55% of accountants are likely to incorporate AI into their practices in the coming years.
AI enhances various services, including automated tax filing, and plays a crucial role in educating taxpayers about the tax filing process. Additionally, AI can be utilized to detect tax evasion, extract essential data from tax documents, and automatically input information into accounting software, thereby alleviating the workload of tax professionals. Consequently, the advantages of AI in tax software not only improve operational efficiency but also drive the adoption of such software, contributing to the growth of the tax software market.
In the future, the automation of business processes is expected to gain significant traction, particularly in labor-intensive areas such as tax preparation, banking, audits, and payroll. Automation can help accounting firms minimize the time required to complete tasks and reduce the likelihood of errors. Therefore, the trends of automation and cloud technology are anticipated to be pivotal in the accounting sector, positively influencing the growth of the tax software market.
The IT and telecommunications sectors are increasingly adopting tax software to minimize manual documentation. Entrepreneurs in the IT and telecom industries often require time to familiarize themselves with tax credits and payment procedures necessary for tax filing. As a result, these sectors are more inclined to implement tax software solutions to simplify the tax process, thereby contributing to the expansion of the tax software market. The right tax software can streamline business operations, identify beneficial tax opportunities, and ensure compliance with filing requirements across various jurisdictions. For example, Avalara's AvaTax offers tax calculations for a wide array of communication transactions by integrating directly with a company's billing or enterprise resource planning (ERP) system or a custom-built in-house system via API. Similarly, CCH Incorporated provides the CCH SureTax communications solution, which aims to mitigate risks and reduce compliance costs associated with cloud-based communications tax calculation and reporting, specifically designed for communication service providers.
As digitization continues to permeate various industries, tax software has become an essential tool for both businesses and individuals, facilitating efficient and improved tax ecosystems, particularly within financial institutions and the expanding retail sector, which further propels the growth of the tax software market. The demand for tax software among companies is on the rise, as these solutions enable compliance with diverse tax rates, regulations, and rules. The North American tax software market is primarily driven by increasing demand from sectors such as banking, financial services, insurance (BFSI), government, and healthcare. In 2022, North America held the largest share of the tax software market in terms of overall revenue globally, and it is recognized as one of the fastest-growing regions in terms of technological advancements and the adoption of cutting-edge technologies.
Key players in the tax software market include Sage Group Plc, Thomson Reuters Corp, Xero Ltd, IRIS Software Group Ltd, Wolters Kluwer NV, Intuit Inc, HRB Digital LLC, Wealthsimple Technologies Inc, SAP SE, and CloudTax Inc. A comprehensive analysis of several other significant players in the tax software market has also been conducted to provide a well-rounded view of the market and its ecosystem.
The overall size of the tax software market has been determined through a combination of primary and secondary research methods. The research process began with extensive secondary research utilizing both internal and external sources to gather qualitative and quantitative data related to the tax software market. This approach also aimed to provide an overview and forecast of the tax software market's growth across all segments. Additionally, numerous primary interviews were conducted with industry participants and experts to validate the data and gain deeper analytical insights. Participants included industry professionals such as vice presidents, business development managers, market intelligence managers, and national sales managers, as well as external consultants like valuation experts, research analysts, and key opinion leaders specializing in the tax software market.