By Robin Silverthorne, Head of Global Tax Services
Over the course of more than two decades working across tax operations and technology within financial services, I have seen tax transform from a largely peripheral function into a central component of market infrastructure. Regulatory expectations have expanded relentlessly, investors increasingly expect frictionless journeys, and institutions are now operating at a level of scale and complexity that legacy tax models were never designed to handle.
What this evolution makes clear is that tax can no longer sit at the edges of the operating model. To function effectively, it must be designed into the fabric of financial infrastructure, technically, operationally, and strategically; rather than layered on as an afterthought.
The past: Tax built for control
Historically, tax systems were shaped by enforcement rather than experience. Technology investments focused on ensuring tax was collected, reported, and auditable, with little consideration given to efficiency or usability. Two forces largely defined this period.
The first was the fight against tax evasion. Undeclared offshore assets represented a significant revenue risk for governments in the hundreds of billions, and regulatory responses were necessarily forceful. Withholding taxes, audits, and retrospective enforcement were the primary tools used to protect tax bases.
The second was relief at source, particularly in key markets such as the United States. Each year, roughly USD 30 billion of withholding tax is collected under Chapter 3, primarily through custodians and brokers operating within the global investment ecosystem. While much of this tax is legitimately due, relief mechanisms have not always been consistently available or applied at the point of payment.
When relief is applied only after the fact, the consequences extend beyond administrative inconvenience. Investors experience delayed access to capital, financial institutions incur operational cost, and tax authorities see increased volumes of reclaims and adjustments. Crucially, where reclaims are not pursued; whether due to cost, complexity, or lack of awareness, tax that was never intended to be borne is effectively lost to the investor. Over time, this represents material economic leakage embedded in market infrastructure rather than in tax policy itself.
These inefficiencies were a direct product of how systems were designed. Processes were manual, document‑heavy, and fragmented across functions. Accuracy mattered, but optimisation, scalability, and end‑to‑end alignment did not. Tax data sat in disconnected silos; duplicated across onboarding, settlement, and reporting, introducing friction at every stage of the lifecycle. Systems were built to satisfy audit requirements and ensure collection, not to minimise leakage, reduce rework, or deliver timely and correct outcomes at scale.
The present: Managing tax as data
Over the last decade, that model has been fundamentally challenged.
The introduction of FATCA and the Common Reporting Standard marked a decisive shift away from episodic enforcement and toward continuous, automated transparency. Financial institutions are now responsible for collecting, validating, and exchanging tax and residency data across borders, on an annual, and increasingly near‑real‑time basis.
The OECD confirmed in by 2022, tax authorities were exchanging information on more than 111 million financial accounts globally, representing approximately EUR 11 trillion in reported assets. This scale alone illustrates that modern tax compliance is no longer a niche operational concern; it is large‑scale data processing.
At the same time, firms must manage a growing set of overlapping obligations, including tax reporting, withholding and reclaims, investor due diligence, and data protection requirements such as GDPR. Each additional rule adds another layer of validation, often touching the same investor repeatedly across different workflows.
From the investor’s perspective, this can translate into repeated requests for information, inconsistent documentation requirements, and delays during onboarding or trading. For institutions, it means higher operational load and greater exposure to error.
Tax data reporting regimes themselves remain a blunt instrument, but the tools behind them are becoming increasingly precise. Advanced analytics, cross‑border data matching, and more frequent validation mean discrepancies are identified faster and tolerance for manual intervention continues to diminish. For many firms, tax has reached a tipping point: it now directly shapes the quality and efficiency of the investor experience.
The future: Designed in, not added later
Looking ahead, the direction of travel is clear.
Regulatory developments point to:
- Rapidly expanding CRS requirements, often implemented with jurisdiction‑specific variations that undermine global consistency
- Continued evolution of US Chapter 3 and Chapter 61 obligations
- The introduction of more Crypto and Digital Asset reporting frameworks (eg 1099-DA and CARF)
- The European FASTER initiative, aimed at modernising relief‑at‑source mechanisms by 2030
While distinct on paper, these regimes are deeply interconnected. They draw on the same core data, overlap with KYC and onboarding processes, and affect transaction processing and reporting. Approaching them as isolated compliance projects is no longer sustainable.
This is why infrastructure rather than regulation itself, has become the real battleground.
Why infrastructure matters
Financial services remain an intensely competitive industry, where success is driven by speed, cost efficiency, and investor experience. Tax now influences all three.
Yet many firms continue to operate with fragmented architectures: separate tax engines, standalone KYC solutions, and disconnected trading and custody platforms. The result is friction: internally, through duplicated effort, and externally, through poor client experience.
The future demands integrated, embedded platforms that manage tax, data, and compliance as a unified capability. Ironically, while firms recognise the need for integration, many still attempt to achieve it on legacy foundations. This approach is expensive, slow, and increasingly misaligned with the pace of regulatory change.
Rethinking “tax technology”
One of the most important shifts underway is a change in how tax technology itself is understood. There is no longer a meaningful distinction between “tax systems” and “core systems”.
The most effective solutions are not built to solve tax in isolation. They address data quality, workflow orchestration, and lifecycle management, with tax as a central – but not separate – use case. This has driven a move toward embedded infrastructure, deeper partnerships, and platforms capable of resolving multiple historic silos through a single implementation.
These capabilities exist, but they demand scale, resilience, and regulatory expertise that few firms can justify or sustain internally.
The case for partnership
Across every major regulatory transition I have observed, a consistent pattern emerges.
Institutions that attempt to build everything themselves tend to move slowly, incur high costs, and deliver partial outcomes. Those that partner with specialist infrastructure providers reach the market faster, manage risk more effectively, and preserve their capacity to innovate where it matters most: at the customer layer.
The strategic choice is therefore clear: build at considerable risk, acquire at a premium, or partner with infrastructure providers whose platforms are designed to evolve alongside regulation.
Time and again, the partnership model proves the most effective. It provides the underlying plumbing that allows firms to stay compliant by design, while focusing their resources on differentiation and growth.
Looking forward
As tax frameworks continue to expand in scope and sophistication, they are increasingly shaping – not constraining – the future of financial services. Handled poorly, they add cost and friction. Designed correctly, they can become a platform for clarity, efficiency, and trust.
The firms and partnerships formed in the next few years will determine whether regulatory complexity is merely managed; or transformed into competitive advantage.
Tax technology is no longer about meeting obligations. It is about laying the infrastructure foundations for the next generation of financial markets.