Across the globe, tax leaders face a moment of unprecedented change and transition, as they respond to pressures both internal and external to the business. In response to the Covid-19 crisis, developments in technology and tax digitisation, the demands of tax authorities and the pace of change in both international and national tax reform and regulation, businesses are facing key challenges in relation to their tax affairs and evolving the focus of their activity. The world of tax is changing.
Listen to an interview with Robert Aziz, BDO’s Global Head of Tax, on the role Tax has played in response to the COVID-19 crisis and on what BDO’s Global Tax Outlook 2020 research tells us about the challenges tax and finance leaders face beyond today.
We commenced the Global Tax Outlook research in February this year, as countries were anticipating, but not yet in the full lockdown phase, of the COVID-19 crisis. These are some of the points and important lessons that emerged:
“The COVID-19 pandemic has meant that a broad spectrum of the business world finds itself in need of financial help. Governments around the world have done a huge amount to help to prevent a permanent diminution in the economic base. One aspect of the crisis is the role that Tax has played and will continue to play in the calculations of both businesses and of governments."
Cash and tax
“Tax has been one of the most important mechanisms that governments have used to support businesses and people throughout the crisis. The old adage about cash being king really comes to the fore. Businesses have realised just how much tax played an important role in that – understanding how much tax is involved in the cash flows of your business is a vital component of your decision-making, and that will put tax right in the heart of the boardroom.
“From a tax perspective our research tells us that there are two or three really big issues which are here today and they will be here in the future. The first is just the task of being compliant - the biggest issue on companies’ minds throughout the world, large or small, is ‘can I report correctly? Can I report on time, do I make my payments correctly and on time?’ The biggest issue is just to be compliant, and that sounds easy to some people, but if you operate in many jurisdictions, it's a huge exercise.
“The second thing is to be able to respond effectively to a multitude of tax changes. Governments will have to deal with the deficits that have arisen, and tax reform will be a part of that thinking.
“Our research tells us that over 40% of businesses around the world have actively changed their tax governance procedures - how they decide questions on tax, and how they approach taxation matters.
“There are differences and nuances around the world – for example, over 80% of respondents in the Americas say that dealing with tax reform and new tax rules is one of their main issues. Globally, it's around 60%-65%, which reflects something very particular about the political situation in the Americas in terms of how governments deal with changing their tax laws.
With technology, the biggest issue for the Americans is finding resource, whereas for Asia, which has the resource and technology, it's more about roles and responsibilities, and effective deployment.
“Technology is not a panacea or a quick fix - there are very few examples of making a big infrastructure bet on technology that comes in on budget and on time, delivering exactly what you wanted. Actually, you can take a lot of strides with smaller bets. For example, rather than attempting 100% automation, if you automate some of your existing manual processes you would free up a lot of capacity to be more strategic and do more rethinking.
“Tax digitisation will become increasingly important. Governments will see your tax liabilities in real time and collect it automatically. And for businesses, that’s also an advantage in terms of being accurate - our research showed us that 70% - 85% of companies around the world are either currently adopting digital strategies to be able to meet what the tax authorities want from them, or are about to deploy those strategies.
“There will be a future for us and it will be prosperous, but in terms of timing, I think it's a bumpy road - we probably haven't seen the worst yet. Businesses will have to emerge leaner, fitter and perhaps smaller, but for sectors that are permanently smaller, there will be other opportunities. A lot of ingenuity and creativity will come through.”
Read more on the Global Tax Outlook 2020 report
Explore the results of the research in more depth at:
Global tax outlook hub