The Strain on Corporate Tax Departments: A Deep Dive into Under-Resourcing and Its Consequences

Corporate tax departments are increasingly facing significant challenges due to under-resourcing, which has led to a widening gap between strategic ambitions and operational realities. According to the 2025 State of the Corporate Tax Department report published by the Thomson Reuters Institute and Tax Executives Institute, nearly 60% of tax professionals describe their departments as under-resourced, a rise from 51% the previous year. This under-resourcing has resulted in a reactive work environment, where tax professionals spend the majority of their time on tactical tasks rather than strategic planning.

The hidden cost of doing more with less: Managing under-resourced tax departments

The report highlights alarming statistics regarding penalties and fines faced by tax departments. Approximately 44% of respondents reported at least one penalty, with nearly half of under-resourced departments experiencing similar issues. One in eight respondents indicated that their fines exceeded $1 million. The reactive nature of these departments not only leads to penalties but also results in missed tax-credit opportunities and delays in cross-functional projects.

The hidden cost of doing more with less: Managing under-resourced tax departments

A significant factor contributing to the challenges faced by tax departments is their approach to technology. The report reveals that 69% of tax departments are in chaotic or reactive stages of digital maturity, with only 6% operating optimally. Furthermore, two-thirds of tax professionals reported that their departments are not utilizing generative AI (GenAI) to enhance efficiency. This technological stagnation exacerbates the issues of under-resourcing and increases the likelihood of penalties.

The hidden cost of doing more with less: Managing under-resourced tax departments

To address these challenges, the report suggests several actionable steps for corporate tax department leaders. These include treating penalty reduction as a key performance indicator (KPI) at the board level, directing a portion of the technology budget toward core preventive measures, and framing resource requests around real avoided-penalty scenarios. Additionally, establishing a proactive time floor for strategic tasks and creating a rapid-triage lane for repetitive issues can help reclaim valuable time for tax professionals.

The hidden cost of doing more with less: Managing under-resourced tax departments

Despite the outlined strategies, critics argue that the systemic issues within corporate tax departments are deeply rooted in organizational culture and governance. They contend that merely implementing incremental changes will not suffice without a fundamental shift in how tax departments are resourced and managed. The reliance on reactive measures and the absence of a robust governance framework are seen as significant barriers to meaningful improvement.

The hidden cost of doing more with less: Managing under-resourced tax departments

• “The recent 2025 State of the Corporate Tax Department report reveals a powerful connection between resource allocation and tax department performance: Under-resourcing perpetuates penalties and reactive workflows that can only be broken by shifting to proactive systems and automation.” — Thomson Reuters Institute Report

The hidden cost of doing more with less: Managing under-resourced tax departments

• “Every hour shifted from reactive compliance to predictive analysis strengthens your tax department’s compliance posture.” — Thomson Reuters Institute Report

The hidden cost of doing more with less: Managing under-resourced tax departments

The findings of the 2025 State of the Corporate Tax Department report underscore the urgent need for corporate tax departments to modernize and adopt proactive strategies. By investing in technology and shifting focus from reactive to strategic work, tax departments can mitigate penalties and enhance their overall effectiveness. However, achieving these goals will require a commitment to addressing the underlying issues of under-resourcing and fostering a culture of proactive governance.

The hidden cost of doing more with less: Managing under-resourced tax departments