Crucial factors shaping worldwide corporate tax regulations
A Glimpse into the Turbulent World of Corporate Tax Management
The tax landscape has been a rollercoaster ride ever since the Trump-driven tax cuts and the Jobs Act came into force back in 2017. Today, the hot topic dominating corporate tax policy discussions is the OECD-led global campaign to enforce a minimum 15% tax on corporate profits and stricter rules for international profit transfers. The goal is straight forward: to thwart multinational companies from parking their profits in offshore tax havens.
This global effort, however, is not the only issue burgeoning on the minds of tax managers. Deloitte's latest global tax policy survey, involving over a thousand tax professionals, has identified a total of five top issues influencing corporate tax policy. And guess what? The global minimum tax (GMT) measure isn’t even leading the pack; its reporting and filing requirements are expected to take effect only from 2025.
The Struggle for Transparency
In this age of global transparency, companies are under immense pressure to reveal their taxation details, with more than two-thirds of survey respondents expecting a surge in public reporting in the near future. Mexico, for instance, requires companies reporting over $732 million in gains to disclose details related to tax payments and facilities.
The call for transparency, however, goes beyond just complying with existing regulations. Companies are eager to embrace fuller reporting, hoping it will provide better insights for their broader stakeholders. But extricating such information requires addressing a multitude of governance, data, risk, and rule-related challenges.
Digitalizing Taxes
In the grand plan for tax digitalization, the OECD proposed the Tax Administration 3.0 model, with its cornerstone being the computation of taxes not by taxpayers but by algorithms embedded in their digital devices.
While respondents look forward to improved customer service and a collaborative tax authority relationship, they remain lukewarm about the potential benefits of this shift. On the flip side, a third of survey participants expect both costs and complexity to escalate. This ambivalent response could be attributed to diverse perceptions about what Tax Administration 3.0 truly entails and a lack of clarity regarding potential outcomes.
As for artificial intelligence, around two-thirds of respondents foresee its widespread use for tax compliance within the subsequent three years.
International Tax Reform
Perhaps surprisingly, international tax reform doesn’t feature as the top concern for tax managers, maybe because the impacts of reporting and filing will only become tangible by 2025. Nevertheless, more than 140 countries representing over 90% of the global economy have pledged to implement the Global Minimum Tax (GMT) put forth by the OECD.
The catch? Countries are still at different stages of ratifying GMT and drafting legislation to implement its provisions. The United States hasn't even kicked-off the ratification process yet. Tax managers, nations, and their advisors are wrapping their heads around the evolving guidelines and requirements.
The Future of Work
Remote work has presented a host of tax implications, with three-fourths of survey respondents citing corporate tax issues related to permanent establishment and transfer pricing as one of their top three concerns for international remote work. Whether it's VAT or social security taxes, or employee tax options, managing the regulatory landscape is proving to be a daunting task.
Green is the New Black
Last but not least, environmental, social, and governance (ESG) initiatives are expected to have a significant impact on the tax function, with 83% of survey respondents anticipating such influence. It's tax on energy consumption that's likely to have the greatest impact, with a third expecting only a minor impact from taxes on waste and pollution.
Stay tuned for more insights into the changing tax landscape. Subscribe to our daily newsletter to keep yourself informed!
- Despite the ongoing global campaign for a minimum 15% tax on corporate profits, other issues are also pressing on the minds of tax managers, as revealed by Deloitte's latest global tax policy survey.
- In the push for transparency, more than two-thirds of survey respondents anticipate a surge in public reporting regarding company taxation details in the near future.
- As part of the effort for tax digitalization, the OECD proposed the Tax Administration 3.0 model, which involves algorithms computing taxes for taxpayers on their digital devices.
- Around two-thirds of survey participants foresee the widespread use of artificial intelligence for tax compliance within the subsequent three years.
- International tax reform, while not the top concern for tax managers at the moment, is expected to have a significant impact once the effects of reporting and filing become tangible by 2025.
- Remote work has given rise to various tax implications, with corporate tax issues related to permanent establishment and transfer pricing being among the top three concerns for international remote work.
- ESG initiatives are expected to significantly impact the tax function, with 83% of survey respondents expecting such influence, particularly on taxes related to energy consumption.
