Abstract:

Aim: The study investigated the integration of SAP systems with digital taxation platforms in KSA, focusing on how such integration enables regulatory compliance, automates audit procedures, and supports sustainable fiscal governance.

Methods: The data was collected from 356 tax managers and accounting managers of various SMEs that operate in KSA and analysed through the PLS-SEM method on SmartPLS. The sample is unique as it targeted 356 tax and accounting managers of various SMEs in Saudi Arabia, thereby providing valuable insights regarding the financial practices in the fast-evolving regulatory environment.

Findings: It was found that the integration of the SAP system and tax reporting played an important role in tax compliance. Nevertheless, e-invoicing did not affect the tax compliance. It was also shown that the cost of tax reporting and e-invoicing significantly influenced the audit automation; but the SAP system integration was insignificant. SAP integrations on e-invoicing tax reporting were a major influence on fiscal governance.

Implications: The results focused on the necessity of specific strategies related to regional problems of digital transformation and contributed to a high level of correspondence between technological measures and organisational preparedness in KSA.

Keywords: SAP integration, audit automation, tax reporting, tax compliance, e-invoicing, sustainable fiscal governance.

1. INTRODUCTION

The Kingdom of Saudi Arabia (KSA) is progressing technologically and economically on the agenda of Vision 2030, the core of which is the diversification of the economy and the improvement of the government’s functioning (Olaopa & Alsuhaibany, 2023). According to (Al-Otaibi et al., 2024), the essence of its transformation is to modernise its tax system to ensure sustainable fiscal management and optimise public revenues. Therefore, to achieve these goals, the integration of Systems and Applications, and Products in Data Processing (SAP) with digital government portals has become extremely important (Kulkarni, 2024). According to (Ghulaxe, 2024), SAP, one of the foremost Enterprise Resource Planning (ERP) software packages, can automate and streamline financial and operational processes in organisations, including tax compliance processes. In parallel, (Altawyan, 2023) discussed that KSA’s tax department, Zakat, Tax and Customs Authority (ZATCA), has made considerable investments in digital transformation through imposing electronic invoicing (Fatoora) and real-time reporting of taxes to increase transparency, precision, and compliance.

The alignment of SAP systems with the digital platforms of ZATCA holds significant advancements for drastic improvements in automating tax workflow processes. As per (Elsharnouby, 2024; and Luz et al., 2024) the integration reduces manual intervention, lowers the risk of errors, expedites audit procedures, and facilitates seamless interactions between taxpayers and the government. However, (Shekhar, 2023) argued that the operationalisation of such integration necessitates overcoming technical, organisational, and regulatory hurdles. While SAP provides standardised tax modules, adapting them to the specific tax legislation and digital mandates of KSA necessitates careful customisation and compliance validation (Escap, 2022).

The implementation of the digital tax platform in KSA and the integration of SAP with the digital tax platform have challenges and opportunities that are different from those projects implemented in developed economies. Unlike the OECD’s tax administrations, which are well developed and usually utilise the power of Artificial Intelligence (AI) in performing fraud detection tasks, risk evaluation, and others, the KSA tax system is only in its early stages in this way. As per (OECD, 2025), 72% of tax management bodies in the OECD use AI, whereas its implementation in KSA is inadequate, which may be attributed to the lack of resources and uniquely proposed solutions that can be adopted to fit local taxation rules and requirements to digitalisation. In a similar way, the Inland Revenue Authority of Singapore has encouraged software providers to integrate tax APIs into their system to make tax filing an automatic process (SCTP, 2024). These initiatives draw attention to the highly developed digital infrastructure of developed nations, a model that is implemented in KSA. Nonetheless, the swift dynamics of regulatory transformations in KSA, such as numerous revisions of VAT and Zakat regulations, will require the constant updating and adjusting of integrated systems, which is a challenge not seen in more solid regulatory regimes.

The broader context for this integration initiative lies within the growing emphasis on worldwide focus on digital taxation and e-governance. According to (Abdul Rashid & Ramli, 2024), governments across the globe are embracing digital technology to make tax administration more efficient, eliminate tax evasion, and promote sustainable fiscal governance. KSA’s strategy of leveraging globally accepted SAP technology alongside bespoke government digital platforms provides a compelling research area on how emerging economies can advance conventional tax systems to move towards digitally powered fiscal governance. However, the theoretical and practical appreciation of the intricacies, consequences, and best practices of SAP and digital tax platform integration in KSA is scarce, demanding systematic research.

Despite the evident strategic benefits of integrating SAP with digital tax systems in KSA, there is a significant knowledge gap in the implementation of operational, technical, and organisational hurdles. As per (Yordanova, 2024), organisations struggle to map SAP modules with the constantly evolving legislation needs of ZATCA, particularly considering frequent VAT regulation updates, Zakat computations, and e-invoicing requirements. Such challenges lead to compliance risk, higher manual interventions, and inefficiencies in auditing procedures (Parimi, 2019). Furthermore, the available literature does not encompass thorough empirical research on the efficiency of such combined systems toward improving tax compliance and audit automation under the specific Saudi context. The majority of available literature, for instance by (Medfouni, 2024), focuses on SAP implementation on revenue collection and tax evasion, failing to comprehensively address the integration of challenges of digital tax platforms and their broader impact on the audit automation and sustainable fiscal governance in the context of KSA. Such a disjointed information base prevents policymakers and practitioners from realising the full potential of digital taxation reforms (Gulzar et al., 2024; Sarwar et al., 2024). However, the study by (Medfouni, 2024) overlooked the integration challenges with tax digital platforms and their broader effects on audit automation and sustainable governance. Moreover, in KSA, SAP integration with the digital tax portal ZATCA poses large challenges like frequent government updates, e.g., VAT and Zakat amendments, and system customisation to support local taxation laws. In addition, institutional readiness and digital infrastructure shortages also offer challenges to successful implementation. This study fills the research gap by analysing the impact of SAP integration within the context of the evolving tax system of KSA, offering insights for policymakers and regional organisations.

The swift economic transformation of Saudi Arabia through the Vision 2030 is also characterised by major improvements in the fiscal system, such as the implementation in 2018 of Value Added Tax (VAT) at 5%, which was raised to 15% in 2020 to improve governmental revenues during oil price volatility periods (Almohaimeed, 2021). This transition was a breakaway from the historical reliance of the Kingdom on oil earnings and the lack of individual income tax, and it followed the greater vision leaders foresaw to diversify the economy and increase financial stability through Vision 2030. Conversely, most developed economies like those in the OECD have a well-developed and stable tax regime, with a developed legacy infrastructure; hence, such rapid changes as seen in Saudi Arabia are not that prevalent. The aggressive style embodied in a rapid implementation of policies and a strong digitalisation initiative, such as the gradual adoption of the Fatoora e-invoicing system since December 2021, can be considered a thoughtful approach by the Kingdom towards the modernisation of the tax administration (OECD, 2024).

The lack of empirical data further complicates the assessment of the integration’s influence on organisational workflows, tax authority processes, and overall fiscal governance. There lies a pressing need for a study that not only captures the integration process but also critically assesses the effectiveness of the process in ensuring compliance, facilitating audit functions, and enabling fiscal sustainability. Without such insights, the risk of suboptimal technology adoption and missed policy objectives remains, threatening to disrupt KSA’s Vision 2030 aspirations. (Altawyan, 2023). Therefore, the study aims to investigate the integration of SAP systems with digital taxation platforms in the Kingdom of Saudi Arabia, focusing on how such integration enables regulatory compliance, automates audit procedures, and supports sustainable fiscal governance. The study seeks to provide theoretical insights and practical recommendations for organisations and policymakers involved in digital taxation initiatives.

The study adds to the novelty by addressing a key research gap through presenting an empirical study of SAP and digital tax platform integration in the distinctive institutional and regulatory context of KSA. In contrast to earlier studies, for instance, (Almaqtari, 2024), shed light on the IT governance role in integrating Artificial Intelligence (AI) accounting and audit operations in Saudi Arabia, failing to discuss the integration of SAP and other digital platforms on KSA taxation. In this case, the study tries to contribute to theoretical understandings relating to digitalisation in tax administration and ERP system tailoring. SAP consolidation with KSA taxation digital platforms is essential to automate financial activities, enhance the accuracy of tax reporting, and ensure conformity with changing tax laws. Consolidation is most likely to facilitate real-time data exchange, reduce human errors, and increase the effectiveness of audits. It will eventually create a more transparent, efficient, and responsive tax administration system that aligns with the Kingdom’s Vision 2030 targets for sustainable financial stewardship.

Further, the research provides novel insights into how audit automation, often discussed conceptually, operationalises in real-world settings, demonstrating its practical advantages and limitations. The inclusion of sustainable fiscal governance as a core theme broadens the agenda beyond compliance to examine long-term economic and institutional effects, responding to current demands for responsible digital governance across public sectors (Shaukat et al., 2024). In addition, the study’s findings will provide practical and actionable recommendations for corporate managers, IT experts, and tax authorities in the KSA public sectors, enabling them to overcome integration complexity and improve system efficacy. The study will also inform policymakers designing and integrating regulatory frameworks that facilitate technological development while protecting public interests.

2. LITERATURE REVIEW

The process of SAP systems integration with ZATCA digital is a complicated process involving technical, organisational, and regulatory complexity. (Yordanova, 2024) pointed out that SAP functions must be adjusted to the ever-changing tax legislation, and very detailed customisation procedures and capabilities are required to update the system, and often tax utility, internal IT resource, and third-party sourcing service are exhausted. One of the key technical issues relates to data interoperability and system compatibility. A study by (Escap, 2022) discovered that government tax portals often use proprietary standards, APIs, and validation rules that need to be seamlessly integrated with ERP data schemes to ensure proper functionality. Discrepancies in data formats, communication protocols, and timing of data exchanges may lead to synchronisation failures and reporting inaccuracies (Shekhar, 2023; Sarwar et al., 2025). (Gupta & Jain, 2024) stated that such integration complexities demand robust middleware solutions and continuous system updates, which increase the cost and time of implementation projects. Security and privacy issues further complicate the integration processes. (Elsharnouby, 2024) explored challenges of SAP implementation in the Egyptian public sector, as it was discovered that leadership and management problems, infrastructure and resources limitations, organisational culture, involving employees, communication, and teamwork make the integration procedures more complex. (Medfouni, 2024) found that organisations face challenges such as adopting end-to-end encryption and difficulties in implementing identity management functionalities, which require extensive system reconfiguration. SAP-ZATCA integration requires multidisciplinary engagement between finance, IT, and compliance units. Still, (Panchal & Khokrale, 2024) identified that alignment issues between business and IT units often result in project delays and lower system usage. (Rahman et al., 2024) discussed SAP implementation challenges, as it was revealed that high implementation costs, complex integration, and usability issues affect the successful adoption of the digital platforms. Moreover, (Almutairi, 2023) explored critical success factors in the integration of SAP digital platforms in Saudi Aramco, revealing that resistance from top management, departments that do not communicate sufficiently, and users who are not given adequate instructions are key issues. Similarly, ensuring data integrity and managing change effectively are critical challenges in the successful integration of SAP platforms (Ravi & Jampani, 2024).

Recent studies by (Medfouni, 2024; Nazarov et al., 2019; and Pałys, & Pałys, 2022) stated that SAP enhances tax compliance by automation and centralisation of the data, and minimising human error and inconsistencies. Similarly, (Yordanova, 2024) states that SAP and data analytics help to increase the accuracy and efficiency of VAT management and tax audit. These results are consistent with the overall views, stating that SAP offers significant benefits in simplifying processes involved in tax administration. However, (Bentley, 2020; and Djafri et al., 2023) posit that the adoption of automation leads to greater responsiveness of tax administrations, which, however, do not explore the bottlenecks of the operations of the rapidly changing tax systems, such as ZATCA in Saudi Arabia. The problem of regular regulatory changes in KSA, including modifications to VAT and Zakat regulations, also complicates the implementation of such systems since SAP must constantly be customised to keep up with these changes.  The experience of SAP integration with digital tax platforms can be summarised as both supportive and critical, but not really questioning the genesis of such conflicting accounts. (Yordanova, 2024; and Medfouni, 2024) also accentuate that SAP has a positive effect on increasing tax compliance by automating, centralising information, and minimising mistakes. Nevertheless, (Escap, 2022; and Shekhar, 2023) warn about the issues of data interoperability and system compatibility that slow down the seamless integration. The differences in the level of technical infrastructure and maturity levels of the regulatory environment across regions cause these contradictions (Talha et al., 2025; Haris et al., 2025). The stable and developed economy in the OECD countries supports the seamless integration of SAP systems due to solid digital infrastructure and regulatory frameworks. On the contrary, the rapid rate of regulatory changes that have taken place in KSA, e.g., the frequent amendment of VAT, Zakat, and e-invoicing regulations, is a major implementation challenge. This is an indication that what has worked in advanced economies might not necessarily work in the Saudi environment, meaning that the regulatory environment is unstable and digital preparedness is yet to be completed in Saudi Arabia. Moreover, studies by (Bentley, 2020; and Djafri et al., 2023), in line with their findings reveal the effectiveness of SAP in automating audit tasks, the authors fail to acknowledge the challenges characteristic of the emerging economies under the scope of audit that possesses less stable tax regime, tax reforms, and rapidly developing systems like KSA.

The integration of digital platforms in fostering sustainable fiscal governance has been discussed within the existing empirical literature. According to (Sharma et al., 2025), a shift in the use of traditional manual systems to the advanced systems that are automated has restructured the financial processes, which has increased their level of accuracy, efficiency, and strategic capacities. While this may be true in theory, the staff fail to critically examine the operational challenges that organisations might encounter along the way through this transition, especially in an environment that lacks adequate technological infrastructure or an environment that lacks appropriate organisational preparation. Such technologies as AI and Machine Learning (ML), which are heralded for simplifying task management and enhancing data security, are often discussed in isolation, without addressing the practical challenges of their integration, particularly in less digitally mature environments. (Hocine et al., 2024) argued that the use of AI and ML in anomaly detection and transparency is presented as an obvious advantage. In contrast, the practical implementation of these technologies to the extent of stakeholder education and system optimisation demands considerable investment in this research area, which is rarely fully explored. Likewise, (Chukwuma-Eke et al., 2022) point out the prospects of SAP-based systems in helping to lower expenses and enhance real-time financial reporting, but they do not address the intricate nature of integrating those systems in industries that have varied regulatory landscapes, such as energy companies. Moreover, the study by (Nowicki et al., 2023) mentions that, SAP integration can enhance the accuracy of financial reporting by eliminating auditing process steps, but the efficiency improvement can take place only when the system is perfectly matched with other organisational processes, which many firms fail to achieve due to the shortage of multifunctional coordination and system legacy issues. These studies highlight the benefits of SAP and tend to minimise the multifaceted nature of the issues of getting such systems to work in real-life situations.

2.1. Theoretical Foundation

The Technology-Organisation-Environment (TOE) framework explains that adopting technological innovations is conditioned by the circumstances in compliance, Audit automation, and sustainable fiscal governance (Al Hadwer et al., 2021). TOE throws light on the complex interaction between technological endowments, organisational readiness, and regulatory environment that impact SAP-digital platform integration, which is part of Saudi Arabia’s taxation modernisation. The studies by (Medfouni, 2024; and Nazarov et al., 2019) mention the positive effect of SAP technological advantages, including automation and data centralisation, but not the issues in the organisational context that can block integration. (Almutairi, 2023) indicates that organisational preparedness, like good change management policies and employee engagement, is key to the success of SAP adoption, but this aspect is largely ignored in the literature. In the same manner, there is limited discussion on matters such as cross-unit coordination (Panchal & Khokrale, 2024; Sarwar et al., 2025), yet they are crucial in ensuring flawless integration. Additionally, the environment, especially the rapidly changing regulatory environment in KSA, is normally ranked as secondary as opposed to core aspects in the implementation process. According to (Yordanova, 2024), frequent VAT updates in KSA need to be adjusted regularly to the system, but in many cases, system adaptation is disregarded in favour of an improvement in the technological field. The applications of the theory indicate a methodological gap because the literature does not acknowledge this interconnectedness between the technological, organisational, and environmental factors. The TOE framework aligns that effective SAP integration needs a one-stop solution, which comprises technology, people, and policy to meet the challenges of digital tax changes, especially at the emerging economy level, with KSA being one such country as envisioned in its Vision 2030.

2.2. Empirical Gap

The present body of literature is considered critical due to a major empirical gap concerning the integration of SAP systems with those of digital taxation, with the situation of the Kingdom of Saudi Arabia (KSA). Even though the implementation of SAP and its benefits and issues have been examined in numerous countries, the majority of the studies have been performed in non-KSA-located regions, such as Algeria (Hocine et al., 2024), Egypt (Elsharnouby, 2024), OECD (Bentley, 2020; OECD, 2025), South Africa (Aroba & Abayomi, 2023), and Serbia (Radosavljević et al., 2023). These researchers mainly concentrate on developed and more technologically advanced economies or tax regimes in Africa, which have varying rates of technological framework, regulatory stability, and institutional readiness compared to the KSA. As an illustration, (Bentley, 2020; and Djafri et al., 2023) isolated the consequences of automation on tax administration in the OECD and North African jurisdictions, respectively, and (Sharma et al., 2025) debated the involvement of SAP-related governance enhancements in South Asian economies. Nonetheless, all these efforts lack empirical support on the impacts of SAP-digital platform integration in Saudi Arabia, especially under the prevailing dynamics and shifts brought by Vision 2030 and the current reforms on VAT and Zakat.

Moreover, the available literature tends to concentrate on the general ERP implementation by (Almutairi, 2023) or high-level digital transformation by (Nazarov et al., 2019) rather than discuss the particulars of integrating SAP and tax-specific digital systems, such as those run by KSA Zakat, Tax and Customs Authority (ZATCA). In addition, no previous empirical research measures the synergistic effect of SAP integration, e-invoicing, and tax reporting on compliance, automation of audits, and sustainable fiscal governance in Saudi Arabia. The reports by (Escap, 2022; OECD, 2024; and Shekhar, 2023) offer a regional/international outlook, but no data is found based on KSA SMEs or tax revenue originators. Since KSA has been characterised by changes in regulations, cultural peculiarities, and digital readiness gaps, the results based on foreign settings cannot be applied to the Saudi environment unless it is officially tested. As such, the study sheds light on an obvious empirical deficit as it presents first-hand data of 356 tax and accounting managers in the KSA SME sector, thus providing a region-specific data set on the technical, organisational, and regulatory patterns driving SAP and digital tax platform integration in the context of the Saudi taxation regime.

Based on the literature review, the following hypotheses have been devised:

H1: SAP system has a significant and positive impact on tax compliance in KSA.

H2: SAP system has a significant and positive impact on audit automation in KSA.

H3: SAP system has a significant and positive impact on sustainable fiscal governance in KSA.

H4: Adoption of E-invoicing has a significant and positive impact on tax compliance in KSA.

H5: Adoption of E-invoicing has a significant and positive impact on audit automation in KSA.

H6: Adoption of E-invoicing has a significant and positive impact on sustainable fiscal governance in KSA.

H7: Tax Reporting has a significant and positive impact on tax compliance in KSA.

H8: Tax Reporting has a significant and positive impact on audit automation in KSA.

H9: Tax Reporting has a significant and positive impact on sustainable fiscal governance in KSA.

Fig. (1) presents a conceptual framework outlining the integration of SAP systems with digital tax platforms for improving tax compliance, audit automation, and sustainable fiscal governance. The framework highlights independent variables, including SAP System, Adoption of E-invoicing, Tax Reporting, Continuous Control Monitoring, and Improving Tax Compliance. Organisational preparedness involves pre-preparedness of institutions through qualified personnel, effective change management as well as constant training to exploit these technologies. The regulatory environment is comprised of the dynamics of tax legislations, requirements of compliance and government policies that fuel the integration process.