TaxTech Weekly: What's next for Taxfix?

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What's next?

Since Taxfix (Öffnet in neuem Fenster) was founded in 2016, a lot has happened for what is probably Germany's best-known TaxTech. Through five funding rounds, the most recent of which was a Series D, Taxfix was able to secure 330 million US dollars from investors such as Creandum (Öffnet in neuem Fenster), Valar Ventures LLC (Öffnet in neuem Fenster) (Peter Thiel) and the Ontario Teachers' Pension Plan (Öffnet in neuem Fenster).

This successfully catapulted Taxfix to the forefront of the minds of German taxpayers who have to file their personal tax returns every year. What hasn't been as successful is the money-making part of the business. Taxfix's latest figures for 2022 show a loss of around 58 million euro - more than half of the combined losses for the years 2016 to 2021.

In addition to the German tax market, Taxfix expanded into Italy, Spain and France during this time, and also explored the US market, but never took the plunge. With competitor Taxefy (Öffnet in neuem Fenster) recently expanding into Germany, an Austrian expansion might have been considered. However, expanding into other countries with different tax systems may not be as easy as imagined, as Taxfix has pulled out of France and is now focusing on its core markets of Germany, Italy and Spain.

In addition to the expected savings from reducing its operating markets, Taxfix has also addressed its mounting losses through several rounds of layoffs - reducing its headcount from over 500 in 2022 to just over 300 now. In addition to staff costs, marketing costs have also exploded and are now being used more efficiently.

On the other side of cost-cutting, Taxfix has gone on a small acquisition spree, buying German competitor Steuerbot in 2023 and UK-based TaxScouts this summer (Öffnet in neuem Fenster). This is where it gets interesting:

The acquisition of Steuerbot (Öffnet in neuem Fenster) can be summarised as the purchase of a small competitor and a supposedly technology-driven acquisition. However, since Steuerbot was a purely German product with the same target group, it didn't help to solve the growth dreams of an EU-wide expansion of the tax market.

For this reason, the acquisition of TaxScouts (Öffnet in neuem Fenster) seems more interesting. On the one hand, TaxScouts opens up the UK market for Taxfix. In addition, TaxScouts does not only focus on tax filing for individuals, but also tries to offer a similar seamless process for the self-employed and freelancers.

The market for tax solutions for the self-employed in Germany is very crowded, with the market-dominating lexoffice (now Lexware Office (Öffnet in neuem Fenster)), the up-and-coming all-in-one platform from Accountable (Öffnet in neuem Fenster) and other players in various guises such as sevdesk (Öffnet in neuem Fenster), Kontist by Ageras (Öffnet in neuem Fenster), WISO Steuer (Öffnet in neuem Fenster), Norman (Öffnet in neuem Fenster) or ... Excel.

However, these solutions don't offer much - if anything - in the way of advanced personal tax filing for the self-employed: Lexware Office, for example, has a partnership with smartsteuer (Öffnet in neuem Fenster) to enable this, Accountable only offers a very slimmed-down version of the private tax return, and a competitor like Norman is still in the planning stage.

On the other hand, the usual DIY solutions for personal tax returns often do not support self-employed income or rental income - which pose similar problems. For example, CHECK24 (Öffnet in neuem Fenster)'s free personal tax return service SteuerCHECK does not support it, Taxfix itself does not currently support it in its own core product, and other solutions such as wundertax (Öffnet in neuem Fenster) (Correction from 16.12.2024: wundertax does support tax forms for the self-employed) and Zasta (Öffnet in neuem Fenster) do not offer solutions for the self-employed either.

From this perspective, Taxfix is making a very interesting strategic acquisition that could soon result in a German TaxScouts version that interacts seamlessly with Taxfix's already existing core product. Expanding their potential market to over 1,9 million sole traders in Germany is a growth strategy that could pay off.

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