Worldwide, the last few years have seen more tax legislation change than ever before. Its frequency and complexity mean that organisations have had to focus increasing resources on the changes to remain compliant, and the more global the company’s business, the more tax law changes there have been to deal with.
With over 40 governments changing hands in the past couple of years, and tax law used as a tool in a variety of ways by new leaders, international regulation modifications show no sign of slowing down in the near future, particularly with Brexit on the horizon. The only constant is that tax enforcement is only going to get stronger!
Four key trends that seem to be at the top of the agenda for global tax authorities are:
The worldwide attempt to move to digital forms of tax reporting will have a greater knock-on effect than changing a few internal processes. The new format and level of detail required by tax authorities will very likely mean investment in new technology and expertise, which will in turn give the other side more insight into operations, possibly resulting in closer scrutiny in the form of auditing.
Rate and rule changes
Tax reform is underway in the US and the EU (aside from Brexit) are aiming to introduce a standard VAT across its members in 2022. Companies trading across borders will need to assess the impact this will have on them. VAT and GST laws are also being amended worldwide to ensure that foreign digital suppliers are liable for their collection and remittance, with many countries and jurisdictions planning to extend their VAT and GST to cross-border digital services.
Tax authorities worldwide are focusing on transfer pricing (TP), due to public and political pressure and the transparency afforded by country-by-country reporting (CbCR). Moving TP from its location-dependent model to a digital environment means that companies who deploy it (whether for tax breaks or not) will need to come up with a new strategy, particularly as detection of TP risk will be facilitated by tech.
Despite the goal of a level playing field for businesses, tax incentives have always been a mainstay, as governments need to attract foreign investors into certain sectors. Recently, R&D has been a major area for tax breaks, both on a personal and corporate tax level in some countries, but early signs show that this trend may be reversing as the numbers year on year internationally are down, according to some commentators in the space.