Manual, repetitive tasks still absorb a large portion of a corporate tax professional's working week. Many leaders have identified closer integration with other business functions as a priority, recognising that tax's real value extends far beyond accurate filing. These two data points frame the central challenge for multinational tax functions in the years to come: compliance is being commoditised by technology, yet the operating structures of most tax departments have not changed at the same pace.
The three operating models
There are three primary structures through which large multinationals organise their tax functions.
In-house tax operations
The in-house model retains the entire function internally, staffed and managed by permanent employees. It has evolved through greater use of automation and shared services, but maintaining it still demands significant headcount and sustained technology investment to keep pace with evolving compliance requirements.
Hybrid operations
The hybrid or co-sourced model combines internal tax capacity with selective use of external providers, typically for specific compliance programmes, filing jurisdictions, or technical specialisms where internal expertise is limited. The commercial attraction is access to a provider's scale for staffing, licensing, and technology costs without surrendering control over strategic direction.
Outsourced operations
The Finance and Accounting Outsourcing (FAO) model transfers most or all tax operations to a third party. A small in-house team makes executive decisions, provides strategic guidance, and signs off on outputs. Most talent and technology needs are met externally. When implemented with structured knowledge transfer, this model retains institutional expertise while allowing internal leadership to focus on planning rather than preparation.
Large tax departments already operate some form of centralised global delivery, and a significant proportion of tax leaders are seeking to expand their use of co-sourced and outsourced resources as technology shifts the economics of in-house compliance.
Why the in-house model is under pressure
Technology is reshaping the cost structure of tax compliance faster than most in-house functions can adapt. Tasks that once required specialist attention are increasingly automated, and the marginal cost of basic compliance work continues to fall. Leadership now needs to evaluate the return on investment from the tax function and what internal headcount is producing beyond compliance throughput.
Succession planning has not kept pace with retirement rates among senior tax professionals, and expertise in emerging technical areas, such as digital cross-border commerce and cryptocurrency, is both in high demand and difficult to retain. When experienced personnel leave, they take non-codified institutional knowledge that replacement hires cannot replicate.
Technology transformation introduces further delay. ERP upgrades and system integrations in tax environments typically take months to fully deploy. By the time systems are operational, regulatory requirements may have moved again, leaving organisations in a state of continuous adjustment.
What a tax centre of excellence delivers
A tax centre of excellence, provided by end-to-end FAO models, centralises operations across entities and jurisdictions, replacing duplicated local effort with standardised processes and common data flows. It also provides scalable access to specialist expertise and technology platforms that most in-house functions cannot economically sustain.
Multinational enterprises that have moved to centralised tax delivery through a service centre or COE report access to consolidated data across ERP environments, higher-volume compliance throughput, and the capacity to channel internal tax leadership toward strategic planning rather than data preparation.
Data infrastructure: the prerequisite
Across in-house and co-sourced environments alike, the most consistent barrier to effective tax operations is data quality and accessibility. In many MNCs, tax data is situated across multiple ERP systems and requires manual extraction and reconciliation before it can support reliable reporting. The state of data infrastructure is what determines whether any technology or model change realises its potential or simply moves the same problems to a different venue.
Organisations need to emphasise the evaluation of how effectively data flows from accounting and finance into the tax function, and whether existing systems can support the efficient, fixed-cost arrangements that external providers need to deliver at scale. When existing processes are manual or poorly documented, these should be stabilised before establishing any fixed-fee external arrangement.
Three questions before choosing
The right model varies by organisation, risk profile, and strategic priorities. There are three evaluations before committing to a structural decision.
Mapping the full scope of tax responsibilities
The complete inventory extends beyond income tax to indirect taxes, international obligations, transfer pricing, withholding requirements, and any non-tax responsibilities the function currently carries. A full picture of scope prevents gaps from emerging after implementation.
Assessing capability alignment
If the tax function is rarely involved in significant transactions, business model changes, or C-suite strategy conversations, this misalignment points toward co-sourcing opportunities rather than internal expansion.
Evaluating systems and process quality
Successful co-sourcing requires clean, well-documented processes and reliable data flows. These are prerequisites for structured external arrangements.
How can Infosys BPM help develop end-to-end FAO models?
Building the right tax operating model for a multinational requires process redesign, technology integration, and the operational depth to sustain performance across entities, jurisdictions, and regulatory cycles.
Infosys BPM taxation services apply finance and accounting transformation expertise to tax function design and delivery. We support organisations in building tax centres of excellence that reduce compliance costs, strengthen data governance, and allow internal tax leaders to focus on the strategic advisory work where they generate the most measurable business value.
Frequently asked questions
A tax centre of excellence centralises tax operations across entities and jurisdictions, replacing duplicated local effort with standardised processes and common data flows. Delivered through end-to-end finance and accounting outsourcing, it gives multinationals scalable access to specialist expertise and technology platforms most in-house functions cannot sustain. This frees internal tax leadership to focus on strategic planning rather than data preparation.
The difference is scope and economics. An in-house tax department retains the entire function internally with permanent staff, demanding significant headcount and technology investment. A tax centre of excellence centralises operations across jurisdictions through an external provider, offering standardised processes, specialist expertise, and platform access at scale. A small in-house team keeps strategic control while preparation moves to the centre.
The in-house model is under pressure because technology is reshaping tax compliance faster than most functions can adapt. Automation keeps lowering the marginal cost of basic compliance, so leaders question what internal headcount produces beyond throughput. Succession planning lags retirements among senior professionals, and ERP upgrades in tax typically take 18 to 24 months, leaving organisations in continuous adjustment.
Multinationals organise tax through three models. The in-house model keeps the entire function internal with permanent staff. The hybrid or co-sourced model combines internal capacity with external providers for specific jurisdictions or specialisms, accessing provider scale without surrendering strategic control. The outsourced FAO model transfers most operations externally while a small in-house team makes executive decisions and signs off outputs.
Before changing the model, multinationals should evaluate three things: the full scope of tax responsibilities beyond income tax, whether the function is aligned with strategic and C-suite conversations, and the quality of systems and data flows. Data infrastructure is the decisive prerequisite; where processes are manual or poorly documented, they should be stabilised before establishing any fixed-fee external arrangement.
