Bridging Erp and Global Tax Engines: Building A Future-Ready Compliance Backbone for Multinational Enterprises

Abstract

Purpose: Enterprise Resource Planning systems and global tax engine platforms rarely speak to each other in real time, and that silence costs multinational enterprises considerably -in filing errors, audit penalties, and the human labour of reconciling inconsistent data across legal entities. This study tests whether four ERP-tax integration enablers (real-time data connectivity, tax engine configurability, IT governance maturity, and data quality standardisation) build three mediating compliance capabilities (integration capability, compliance automation, and regulatory agility) that in turn drive tax compliance performance, transfer pricing accuracy, audit readiness, and operational cost efficiency -with institutional pressure moderating the integration-to-compliance pathway.

Design/Methodology/Approach: A cross-sectional survey of 387 tax directors, ERP architects, and chief compliance officers across financial services and manufacturing MNEs in India, Singapore, and the United Arab Emirates provided the dataset for three analytical studies. Study 1 estimated the full structural model in PLS-SEM (SmartPLS 4.0, 5,000-iteration bootstrapping) with PLS predict cross-validation. Study 2 applied Henseler's permutation-based PLS multi-group analysis (5,000 permutations) across two contrasts -MNE size (large versus mid-cap) and sector (financial services versus manufacturing). Study 3 trained an XGBoost regressor (eta = 0.07, max depth = 6, test R² = 0.731) and a Random Forest classifier (500 trees, AUC-ROC = 0.951) and computed SHAP feature importance scores compared against PLS-SEM path coefficients via Spearman rank correlation. The theoretical frame integrates the Resource-Based View (Barney, 1991), Dynamic Capabilities (Teece et al., 1997), and Institutional Theory (DiMaggio & Powell, 1983).

Findings: Integration capability is the dominant mediator of ERP-tax compliance outcomes, carrying both the highest structural path to tax compliance performance (β = 0.403, f² = 0.203) and the highest SHAP importance score (0.403). Compliance automation is the strongest path to audit readiness (β = 0.356). Large MNEs show significantly stronger data connectivity and tax engine configurability effects on integration capability than mid-cap firms (Δβ ≥ 0.127, p ≤ 0.021). Financial services firms show significantly stronger tax engine and data quality effects than manufacturing firms on regulatory agility and integration capability (three of five tested paths). Institutional pressure significantly moderates the integration capability-to-compliance path (interaction β = 0.213, p < 0.001). SHAP-PLS Spearman rank convergence reaches rs = 0.97. SRMR = 0.049, NFI = 0.941. All 13 hypotheses are supported.

Practical Implications: Tax engine configurability and real-time data connectivity have the largest combined effect on integration capability and, through it, on tax compliance performance. MNEs investing in bidirectional API architecture between SAP or Oracle ERP systems and Vertex, SOVOS, or similar global tax engines can expect measurable filing-accuracy gains that scale with firm size and regulatory stringency. Firms operating under coercive BEPS Action Plan and Pillar Two reporting obligations extract the largest compliance performance return from integration investments already in place.

Originality/Value: This is the first study to combine PLS-SEM, PLS-MGA, and XGBoost + Random Forest + SHAP in a single empirical programme on ERP–tax engine integration compliance. The SHAP-PLS convergence framework provides between-method construct validity that self-report survey designs alone cannot supply. The study also provides the first empirical mapping of ERP integration enablers to specific BEPS and Pillar Two compliance pathway evidence.