TaxTech Weekly: What's next for Taxfix?

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What's next?

Since Taxfix (Si apre in una nuova finestra) 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 (Si apre in una nuova finestra), Valar Ventures LLC (Si apre in una nuova finestra) (Peter Thiel) and the Ontario Teachers' Pension Plan (Si apre in una nuova finestra).

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 (Si apre in una nuova finestra) 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 (Si apre in una nuova finestra). This is where it gets interesting:

The acquisition of Steuerbot (Si apre in una nuova finestra) 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 (Si apre in una nuova finestra) 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 (Si apre in una nuova finestra)), the up-and-coming all-in-one platform from Accountable (Si apre in una nuova finestra) and other players in various guises such as sevdesk (Si apre in una nuova finestra), Kontist by Ageras (Si apre in una nuova finestra), WISO Steuer (Si apre in una nuova finestra), Norman (Si apre in una nuova finestra) 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 (Si apre in una nuova finestra) 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 (Si apre in una nuova finestra)'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 (Si apre in una nuova finestra) (Correction from 16.12.2024: wundertax does support tax forms for the self-employed) and Zasta (Si apre in una nuova finestra) 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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