Tax controversy used to arrive with a knock on the door, years after the fact. Now it sits on the desk every week, driven by faster rule changes, more disclosure and tax authorities that can interrogate data at scale. EY’s latest global survey points to a clear pivot: companies are integrating AI into the core of tax risk management as the list of potential disputes grows.

The 2025 EY Tax Risk and Controversy survey, based on responses from 1,934 senior tax executives, finds that 87% believe generative artificial intelligence will improve the efficiency and accuracy of future tax controversy management. Nearly seven in ten respondents say they have already built at least one GenAI tool focused on tax risk or controversy, or are integrating GenAI into existing tax processes. For a function that typically moves only when the controls are watertight, the speed is notable, and it signals how hard the ground is shifting under tax teams.

Disputes are rising, resolutions are slowing, and the rulebook is still expanding, from tariffs to digital levies to global minimum tax. In that context, tax leaders appear increasingly convinced that technology is no longer optional.

From retrospective defence to real-time engagement

The nature of tax controversy is changing. Historically, disputes often centred on positions taken years earlier, supported by documentation assembled long after the event. EY’s findings suggest this model is giving way to a more real-time engagement model, as both businesses and tax authorities gain access to richer, more immediate data.

That is why GenAI has found a quick route into tax teams. Thirty-nine per cent of respondents report having built at least one pilot or tool explicitly focused on tax risk or controversy. In contrast, a further 30% say they are integrating GenAI into other core tax processes. The net result is that nearly seven in ten respondents are already past the experimentation phase.

The most common uses are pragmatic rather than futuristic. Respondents say they are using, or plan to use, GenAI to analyse and summarise large volumes of external tax information, particularly new and proposed legislation. Many are also applying it to internal tax materials, including opinions, memos and meeting notes, while others are focused on improving the consistency of data shared with tax authorities. Just over a quarter also use tax technology for predictive analytics, even where GenAI is not yet doing the heavy lifting.

The satisfaction gap is evident. Ninety-one per cent of respondents using any form of AI say they are somewhat or very satisfied with how they manage tax controversy, nine percentage points higher than the overall survey average. Among those actively integrating GenAI into controversy processes, 46% describe themselves as very satisfied, compared with 31% of those who have not adopted the technology.

The survey also reveals a strong belief in the value of end-to-end platforms. Ninety-two per cent of respondents who are already integrating GenAI into other tax processes agree that companies using a single, integrated tax risk and controversy platform will be best placed to succeed in the future. For groups operating across dozens of jurisdictions, the appeal is having a single view of risk, a single audit trail, and fewer local variations creeping into the numbers.

Authorities accelerate their own use of AI

Tax authorities are also moving rapidly along the AI adoption curve, raising the stakes for businesses that lag. According to data cited in the EY report, 29 of the OECD’s 38 member countries were already using some form of AI in tax administration by 2024. Of those, 79% were deploying it specifically to detect tax evasion and fraud.

Between 2018 and 2022, the number of tax administrations using AI-embedded tools and machine learning rose by 34%, with a further 8% planning to adopt them. Authorities are now experimenting with GenAI for tasks such as tax return review, document auditing, taxpayer guidance, and more targeted compliance initiatives.

For corporates, this matters because it narrows the margin for error. As authorities become more adept at cross-referencing data sources and identifying anomalies, inconsistencies in reporting or documentation are more likely to be detected, and detected sooner. The traditional advantage of scale and complexity, once a buffer against scrutiny, is eroding.

New flashpoints gather pace

The survey is clear on what comes next. International coordination on tax policy, combined with uneven national implementation, is widely expected to increase both the number and duration of disputes over the next three years.

Ninety-two per cent of respondents say the growing implementation of a global minimum tax under the OECD’s Pillar Two framework will somewhat or significantly increase disputes. A similar proportion expect disagreements to rise if countries fail to reach consensus on reallocating profits of large multinationals to market jurisdictions, regardless of physical presence. Transfer pricing remains a significant concern: 90% say changes in this area will increase disputes, yet only 49% feel highly prepared to manage the resulting workload.

Digital taxes have emerged as the most frequently cited source of tax risk for the first time in the survey’s history, selected by 30% of respondents. Tax incentives follow closely, also at 30%, while indirect taxes such as VAT and GST are cited by 28%. Permanent establishment risk and transfer pricing for goods complete the top five.

Digital taxes top the list partly because the truce is fragile. If agreement on taxing rights unravels, multinationals could find themselves navigating a patchwork of unilateral measures, particularly those in technology, media and telecommunications. These sectors already report some of the highest levels of ongoing controversy, with 12% reporting more than 100 active audits.

Transparency is accelerating the cycle as well. Ninety-nine per cent of respondents report at least one ongoing tax dispute, and 69% report managing between 11 and 99 simultaneously. Ninety-two per cent believe increased information exchange between tax authorities will raise dispute volumes, while the same proportion expect public country-by-country reporting to have a similar effect.

As more jurisdictions require public disclosure of tax data, including in the European Union and Australia, companies face not only tax but also reputational risk. Misinterpretation of data by external stakeholders could trigger scrutiny from authorities or investors, increasing the pressure on corporates to ensure accuracy and consistency across all public reporting.

Governance gaps come into sharper focus

If technology adoption is moving quickly, governance is lagging. Only 31% of respondents say they are very satisfied with how their organisation currently manages tax controversy. The most common sources of dissatisfaction include weak escalation of local issues, tax authorities’ attitudes toward large corporates, and the sheer volume of regulatory change.

Perhaps more concerning is visibility. Just 9% of respondents say they have complete visibility over all ongoing tax audits and disputes, down sharply from around a quarter in previous surveys. Those with complete visibility are far more likely to use global audit and dispute tracking tools and to be very satisfied with their outcomes.

Despite this, there is a clear appetite for improvement. Ninety-one per cent of respondents say they are likely to increase their focus on strengthening global tax governance over the next three years. Among the largest businesses, with revenues above US$100bn, nearly nine in ten have implemented at least one governance activity, such as a tax risk committee. Still, almost none have implemented all key elements.

This gap matters because tax authorities increasingly view governance as a proxy for overall tax risk. In an environment where AI accelerates both compliance and enforcement, governance frameworks that cannot keep pace risk creating blind spots. GenAI may help by identifying regulatory changes and supporting updates to governance policies, but it does not remove the need for accountability, escalation and human judgement.

Treasury starts to feel it

For large corporates, the implications extend well beyond the tax function. Rising controversy ties up capital, creates uncertainty around cash flows and can influence provisioning, funding decisions and investor communication. As disputes become more frequent and more visible, the ability to manage them proactively becomes a broader financial issue.

The survey’s findings suggest that companies that integrate technology, governance, and data management are better positioned to respond with confidence. Those who do not risk being drawn into a reactive cycle, responding to authorities on their terms rather than their own.

GenAI is not presented as a cure-all in the EY survey. Talent constraints remain the most significant barrier to further adoption, cited by 44% of respondents, followed by budget limitations and uncertainty around use cases. But the direction of travel is clear. As both corporates and tax authorities invest in advanced tools, the baseline for effective tax risk management is rising.

Tax controversy is shifting from a periodic legal fight to a live operational discipline. The job now is to make positions defensible at the point of adoption, with governance that holds across borders and data that can withstand real-time scrutiny. The survey suggests that teams that invest early feel steadier, even as the landscape continues to change.