This article has been updated. It was originally published on 5 October 2020
Across the globe, tax leaders faced a moment of unprecedented change and transition, as they responded to pressures both internal and external to the businessin 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 meant that businesses were facing key challenges in relation to their tax affairs and evolving the focus of their activity.
Listen to an interview with Robert Aziz, BDO’s Global Head of Tax, on the role Tax 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 2020 as countries were anticipating, but not yet in the full lockdown phase, of the COVID-19 crisis. Some of the key lessons and factors that emerged, according to Robert Aziz, included:
“The COVID-19 pandemic meant that a broad spectrum of the business world found 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 was the role that Tax has played and continues 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 told us that there are two or three really big issues which are here today and 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 had to deal with the deficits that arose, and tax reform was part of that thinking.
“Our research told 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 were differences and nuances around the world – for example, over 80% of respondents in the Americas said that dealing with tax reform and new tax rules is one of their main issues. Globally, it was around 60%-65%, which reflected something very particular about the political situation in the Americas in terms of how governments dealt with changing their tax laws.
With technology, the biggest issue for the Americans was finding resource, whereas for Asia, which has the resource and technology, it wasmore 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 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 were either currently adopting digital strategies to be able to meet tax authorities' requirements, or were about to deploy those strategies.
Read more on the Global Tax Outlook 2020 report
Explore the results of the research in more depth at:
Global tax outlook hub