Canada Tax Software Market to Grow at a CAGR of 8.7% to reach US$ 1,506.87 million from 2022 to 2030

The Canada tax software market was valued at US$ 775.27 million in 2022 and is expected to reach US$ 1,506.87 million by 2030; it is estimated to record a CAGR of 8.7% from 2022 to 2030.

Canada Tax Software Market Analyst Perspective:

The accountancy sector plays a significant role in the tax industry's growth in Canada. The country's accountancy sector is doing its business resiliently, backed by long-term investment into the profession, coupled with the availability of high-quality talent. The country also witnesses imprints of the largest global firms in the country. They expanded their business across Canada, which increased the probability that these businesses from diversified sectors could tap financial expertise from the country, leading to the adoption of solutions offered by tax software providers of the country.

Increasing digitization across tax systems and growing adoption of tax software from the retail sector are contributing to the growth of the market. Further, the growth of the tax industry and support from the Canadian government are expected to provide lucrative opportunities for the growth of the market in Canada. The increasing focus of organizations on enhancing business processes through integrating advanced technologies is anticipated to be a market trend during the forecast period. The tax software market is a highly fragmented and competitive marketplace. As leading companies in this market continue to broaden their addressable market by expanding their current offerings and diversifying their client base, all prominent players face an increasing level of competition, both from start-ups to established companies across the world.

Market Overview:

Since the advent of digitalization in Canada, end-user companies have adopted advanced technologies for reducing manual business processes and implementing automated processes for increasing productivity and achieving efficient business outcomes. Owing to the internet and various platforms, such as desktops and smartphones, there is no need for individuals to visit a tax office; they can file a tax return and make a tax payment remotely. End users such as commercial enterprises and individuals are adopting tax software, as it automates tax processes and reduces the manual efforts of computing tax. The software allows registering the information of the taxpayer, and it is then automatically entered into tax returns; it also enables automatic calculation. Various industries use tax software for filing and returns, and they also generate a massive volume of data. In such cases, the industries have to be cautious while transferring tax-related files online. Therefore, tax software vendors provide software with security measures.

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Canada Tax Software Market: Strategic Insights

Market Size Value in	US$ 775.27 million in 2022
Market Size Value by	US$ 1,506.87 million by 2030
Growth rate	CAGR of 8.7% from 2022 to 2030
Forecast Period	2022-2030
Base Year	2022

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Market Driver:

Increase in Digitization of Tax Systems Fuels Canada Tax Software Market Growth

The ongoing digital revolution presents huge scope for businesses to use digital services and automation to modify their business models and traditional processes for improving operational efficiencies and revenues. Digital transformation or automation in businesses is characterized by the integration of digital technology in various business processes, organizational activities, and business models. The digitalization of tax systems aids in enhanced operational efficiencies, end-to-end business process optimization, and cost and human error reduction.

Citizens mostly find the process of paying taxes to governments challenging and time-consuming. As enhancing tax compliance and collecting sufficient revenue is necessary to be able to finance public goods and services, the tax administration authorities are increasingly undertaking digital transformation and automation of their systems. Digitalized tax systems have the potential to bring successful and sustainable tax reforms, ensure proper taxation, and address compliance-related challenges. Further, the COVID-19 pandemic, which led to a rise in the use of digital commerce, made digital transformation especially urgent for tax administrations. Companies in Canada are increasingly embracing tax technology and automation to comply with new electronic reporting requirements and to enhance the accuracy and efficiency of tax functions by harnessing the capabilities of automation. The relevant investments by these companies in tax software technologies continue to rise and improve their ability to gather more tax information and gain more insights into the tax and financial positions of taxpayers. In May 2022, CentralSquare Technologies announced that six municipalities in Ontario, Canada, selected CentralSquare's Property Tax solution to enhance their citizen experience in Canada.

Tax software quickly analyzes a client's overall financial situation and suggests insurance or investment products. It also provides services such as auditing, bookkeeping, and comprehensive financial plan preparation. Also, the tax preparation process has become faster and more efficient as vast information is now available in digital format, which would, in turn, help tax preparers to directly import their client data from personal finance software onto their tax returns, with a single click. This has eliminated the need for manual entries. Sage Group plc, Xero Limited, SAP SE, and CloudTax are among the key tax software vendors operating in Canada. Mobile apps are also available now for taxpayers, which help them effortlessly e-file their taxes. Thus, the continuous digitization of the tax system propels the Canada tax software market growth.

Segmentation and Scope:

The Canada tax software market is segmented on the basis of product, tax type, deployment type, end users, enterprise size, and industry vertical. Based on product, the tax software market is segmented into software and service. Based on tax type, the tax software market is segmented into sales tax, income tax, corporate tax, and others. Based on deployment type, the Canada tax software market is segmented into cloud and on-premise. Based on end users, the tax software market is segmented into individual and commercial. Based on enterprise size, the tax software market is segmented into small enterprises, medium enterprises, and large enterprises. Based on industry vertical, the Canada tax software market is segmented into BFSI, government, IT and telecom, healthcare, retail, and others.

Segmental Analysis:

Based on product, the Canada tax software market is bifurcated into software and service. Tax software products are designed to manage the tax returns of commercial enterprises and individuals. The tax software simplifies the tax filing procedure by automatically calculating the business and individual's tax obligations with given inputs. The products of tax software are available in two formats: traditional software format and software-as-a-service (SaaS) format. The increase in digital financial transactions among several industries, the complex nature of the existing tax system, and increased awareness of tax administrators are among the major factors increasing the demand for tax software. In spite of spending a lot of time managing tax compliance, businesses are still lagging in maintaining accuracy in their respective tax filings. This is due to manual tax calculation practices that are prone to errors. Implementation of advanced automated solutions such as tax software can help enterprises tackle various challenges associated with income tax returns, such as unproductive and repetitive rates of interest, maintenance of expensive in-house applications, and time-consuming manual record keeping. All the factors above are expected to fuel the demand for tax software among enterprises of all sizes during the forecast period.

Key Player Analysis:

Sage Group Plc, Thomson Reuters Corp, Xero Ltd, IRIS Software Group Ltd, Wolters Kluwer NV, Intuit Inc, HRB Digital LLC, Wealthsimple Technologies Inc, SAP SE, and CloudTax Inc are the key Canada tax software market players profiled in the report.

Canada Tax Software Market Recent Developments: 

The Canada tax software market players highly adopt inorganic and organic strategies. A few recent key market developments are listed below: 

• In September 2023, Wolters Kluwer, a global leader in professional information, software solutions, and services, unveiled new capabilities for CCH iFirm Taxprep, the only cloud-based tax compliance solution in Canada designed to meet the needs of tax and accounting firms of all sizes.
• In June 2023, Thomson Reuters Corp announced its plan to buy SurePrep LLC—a US-based provider of tax automation software and services whose products and solutions are used by more than 23,000 tax professionals—for US$ 500 million in cash.  
• In May 2023, Conquest Planning Inc.—a technology platform modernizing financial planning with customized and convenient advice—announced a partnership with Wealthsimple, a platform that has built some of Canada's leading digital financial products and holds more than US$ 18 billion in assets for over 3 million Canadians.
• In October 2022, IRIS Software Group—a leading global software provider of accountancy solutions—announced that it had acquired Thomson Reuters myPay Solutions, a trusted online payroll processing service designed to empower CPAs. myPay Solutions provides comprehensive outsourced payroll and associated banking and tax services via CPA firms to small and medium-sized businesses across all 50 states in the US.
• In November 2020, Sage, the market leader in cloud business management solutions, announced a new integration between Sage Business Cloud Accounting and Calgary-based TaxCycle. TaxCyle provides an income tax preparation solution for accounting professionals serving Canadian clients. Accountants using Sage Accounting can automatically populate data into the system from TaxCycle.