Tax and legal leaders should be looking for simple, immediate, and flexible actions that will enable them to maintain core operations and processes remotely while simultaneously keeping employees safe and engaged.

Protect the workforce and business continuity. With many cities in lockdown and employees forced to work from home, the top priority of business leaders must be to ensure their people are safe, secure, and adhering to local restrictions. The next step, however, is to ensure they are empowered to continue their work remotely. For example, by making available enabling technologies such as virtual private networks (VPNs), data portals, and virtualization technologies that are effective and secure. This will be key to driving business continuity in tax and legal functions over the coming months.

Even with various tax authorities offering delays to compliance deadlines, meeting obligations during this period of virtual working and lockdowns may well be a challenge. Tax functions that have already made progress on their digitalization journey should be better placed to maintain core operations. Many will still need short-term support to meet their compliance requirements.

Tax leaders need to have a well-informed and strategic view of incentives and relief measures available to inform decision-making at the executive level.

Assess the value of utilizing new tax relief legislation. Governments and tax authorities are unleashing an unprecedented amount of new tax measures to keep businesses afloat and help reduce some of the disruptive economic impacts of the crisis. Based on our review of over 120 countries, most have enacted some form of tax and fiscal reform to combat the impacts of COVID-19.

Learn about government incentives. Tax leaders will need to quickly assess the range of incentives and relief measures being passed by countries around the globe. Additionally, in some countries, provincial, state, and local governments are taking similar actions. Those with a global remit will find this task exponentially more challenging.

In the current environment, tax can be a significant source of cash generation and preservation. Tax leaders should be working to uncover new cash tax opportunities to help the business survive.

Identify and execute cash tax opportunities. In the immediate wake of the crisis, businesses will need to preserve cash and generate short-term cash opportunities. Tax can and should play a central role. There are often significant tax—as well as some legal—implications involved in moving cash between jurisdictions or repatriating cash back to a head office.

In part, some cash tax opportunities will flow from the new tax measures being implemented around the world. Many have been designed specifically to help businesses keep cash on the balance sheet longer. Taking advantage of the various direct and indirect tax deferrals, indirect tax refunds, research tax incentives (which can generate cash refunds in some countries), and other emergency measures will be key.

Tax leaders should also be re-examining their 2019 returns and evaluating their 2020 tax positions in order to optimize in the new environment, for example, the availability of carry back losses. And they should be looking back at their indirect tax payments to uncover any potential refund claims or potential overpayments. In the slightly longer term, there may be value in reassessing the corporate structure.

As the business explores and responds to market conditions, the tax function must have scenario-planning information in order to help executives understand the tax implications of their decisions.

Manage impact on tax and treasury structures. As the organization pivots to deal with new pressures and challenges during the acute phase of the crisis, significant new tax and treasury implications will likely be created. Tax leaders need to have a clear understanding of their current tax structure and a good sense as to how various business decisions might impact the company’s tax position in order to help the business make sound, long-term decisions in this time of rapid change.

Tax leaders will also need to focus on aligning tax policies and positions to meet the fluctuations in pricing and demand commanded by current market conditions. This requires thinking about the impact not only on direct taxes (both leakage and losses) but also how these changes will impact transfer pricing policies going forward.

While much focus will likely be placed on managing the marginal tax rate for direct taxes, indirect tax considerations will require as much if not more immediate attention. Where sales in jurisdictions plummet, sales related tax positions may become inefficient. In short, it’s all connected. Transfer pricing, tax policies, customs, and duty taxes, and other indirect taxes will also need to be reviewed as supply chains and value chains become disrupted.

The tax and legal functions always play an important role in evaluating financing and transaction arrangements. It is important this is not an afterthought, especially during times of great disruption where leaders are under pressure to act with speed.

Support distressed debt and transaction cost management. For many organizations operating with tight working capital restrictions and those facing liquidity issues, new financing and debt restructuring may be required. Tax and legal play an important role in helping the business understand the implications of refinancing decisions, both internal and external.

Indeed, tax and legal functions should be involved in helping the business make decisions about many of the commercial adjustments that must occur during this period—from repositioning production lines and merging operations to moving cash between jurisdictions and paying severance costs. Each transaction will carry tax and legal consequences that should be factored into business’ decision-making.

Contractual obligations

Assess how COVID-19 may be impacting commercial contracts, including delays in performance or delivery, early termination requests or other changes to terms and conditions.

Contract disputes

Prepare for potential claims by developing a claim strategy, gathering relevant documentation, and formulating an end-to-end communications response.

Workforce changes

Understand the legal obligations involved in workforce continuity and design an effective approach to manage workforce changes within the local legal framework.

Data protection

In jurisdictions where employers are now required to monitor and report on employee health, legal counsel will need to ensure the organization is staying within local personal data protection legislation.

Disclosures

General counsel at public companies will need to continuously assess whether the organization must make additional risk factor disclosures based on the severity and impact of the pandemic.