Global Tax Policy

The global tax policy landscape is changing with the OECD’s Pillar Two introducing a whole new international tax system. Countries are responding, including by implementing new corporate taxes and considering new ways of competing for investment. At the same time, the UN is proposing an alternative approach aiming to be more inclusive for developing countries. Meanwhile, Pillar One (re-allocation of taxing rights) adoption is taking longer than planned, raising questions about re-introduction of digital service taxes. Staying informed and adaptable is crucial for businesses and governments to navigate these complexities.

The digitalisation of tax processes and advancements in AI/Generative AI are beginning to have an impact on taxpayers, tax authorities and tax advisors, while the governments are only beginning to consider regulation of AI. Tax Administration 3.0, encompassing a digital transformation of a traditional tax authority, with a real-time collaborative approach to tax compliance, paves the way to more streamlined and efficient processes for both sides. E-invoicing, e-trade, new digital products and services all present opportunities and challenges for the global tax community.

Tax policy plays an important role in the international efforts on combating climate change and achieving sustainability and encompasses various initiatives, such as the OECD’s Inclusive Forum on Carbon Mitigation Approaches, Carbon Border Adjustment Mechanisms (CBAMs) and Emissions Trading Systems (ETS). However, as countries adopt their own programmes of ’green’ grants and incentives, environmental taxes and carbon pricing strategies, challenges emerge in the form of trade disputes. Ultimately, the ambitious objective is to reach a global consensus on carbon pricing. This is an area of collaboration between tax, trade and regulation.

The way we work is changing and cross-border remote working is a new global trend, affecting all areas of tax and attracting attention from the OECD, IFA and UN. It raises issues such as permanent establishments, profit allocation, VAT, market access, trade agreements, immigration rules, employment law and taxation and contracting. Laws and regulations are yet to catch up, posing challenges for tax authorities, businesses and individuals. A comprehensive understanding of the evolving nature of remote work and a co-ordinated global approach are needed to address these challenges.

Stakeholder interest in tax affairs of large MNEs continues to be high and businesses are increasingly expected to volunteer more information about their approach to the management of tax and its outcomes. As governments continue to seek tax revenues and fight tax avoidance, there is also a proliferation of mandatory disclosure regime. This leads to ever increasing complexity and compliance burden for businesses, affecting productivity. At the same time, tax authorities may lack capacity to effectively utilise the reported information. Recently, some countries began to seek simplification of tax compliance to stimulate growth.