Responding to International Tax Reform remains a central focus for tax and finance executives, but other strategic themes are also emerging as priorities.
• Transparency and digitalization are now ranked as the most significant priorities for business globally.
• Also prominent, were further pressures from the rise of AI, changes in the nature of work, and demand for climate and sustainability initiatives.
Deloitte’s 2024 Global Tax Policy Survey analyzed the responses of more than 1,000 tax and finance executives within the Forbes 2000 set of multinational organizations, representing a wide range of industries, organization sizes, and geographies to understand how they are handling the immense changes in the global tax landscape. In an era being shaped by international tax reform, increased calls for more tax transparency and environmental sustainability measures, and the rapid advancement of tax digitalization, the survey points to numerous demands competing for attention of the tax function and business at large.
“International tax reform to implement a global minimum profits tax continues to dominate tax news headlines, but our survey revealed that tax and finance executives are grappling with other priorities which are demanding even more attention. For 2024, the biggest impact is the increasingly burdensome and complex tax reporting and data collection requirements taxpayers must meet.” says Amanda Tickel, Deloitte Global Leader, Tax & Legal Policy. “The survey gives us a valuable insight into how these challenges are going to evolve in the future, and where tax teams will need to adapt.”
Ever-increasing demands for tax reporting has pushed transparency and reporting up as top priority
As various stakeholders require more disclosures on multinationals’ tax affairs, and as many organizations respond by volunteering more information so that their tax data can be understood in the appropriate context, it should come with little surprise that transparency and reporting ranks as the highest impact of the five policy themes explored in the survey.
In fact, seven in 10 respondents expect their public tax transparency disclosures to increase in the coming years, due in part to new public country-by-country reporting (PCbCR) requirements. Thirty-seven percent said the increased disclosures will entail new types of information they don’t currently report.
On top of the tax reporting requirements, most (79%) respondents expect to be affected by transparency demand emerging from the climate and sustainability field.
While most respondents (97%) have a tax transparency strategy in place, they face challenges in executing it, ranging from providing relevant reporting to senior leadership, to governance and data risks, and understanding the applicable rules.
Digitalization of tax is high on the agenda
The digitalization of tax was flagged as a key priority. One of the key elements is the movement to Tax Administration 3.0, a digitalized model that includes enhanced compliance with less resources. Nine in 10 respondents report at least some progress in their country with this model with respondents expecting Tax Administration 3.0 to bring a range of positive impacts for their business and operations, including improved customer service (42%), a more collaborative relationship with tax authorities (37%), and fewer and more efficient tax audits (36%).
Conversely, some respondents retained concerns about increased costs and complexity of digitalization, demonstrating the importance for governments to provide more clarity on what the concept entails and the long-term business benefits.
The survey also picked up on the emergence of Artificial Intelligence (AI) and Generative AI as an increasingly important factor in the tax world. Sixty-six percent of respondents expect AI to be widely used in tax compliance over the next three years, though many of these respondents (40%) think tax compliance will still involve significant human oversight. As businesses explore the most effective and valuable use cases, the adoption and value creation of AI/GenAI will be largely influenced by how governments choose to regulate it.
International tax reform remains front and center
The tax policy scene continues to be dominated by the Organization for Economic Cooperation and Development’s (OECD) two-pillar approach to international tax reform.
While politicians and administrators thrash out the timeline for implementation our respondents continue to plan on the expectation of both Pillar 1 and 2 being fully rolled-out in the next few years.
Respondents have mixed feelings on how Pillar Two will impact their business: 45% believe it will make corporate tax rules more complex, while 38% believe it will make them fundamentally simpler as some of the existing laws may be repealed as a result of post-Pillar Two decluttering.
It is expected that Pillar Two will end competition on tax rates, but it will not end the competition entirely with the focus shifting to ‘Pillar Two-friendly’ tax incentives – 77% respondents expect such incentives in their country.
The future of work presents new tax challenges
As businesses embrace greater flexibility and mobility across their workforce, new tax and legal risks arise.
Three-fourths of respondents rated corporate tax implications of international remote working as the highest regulatory concern (75%), but this was closely followed by employee tax (65%) and social security taxes (65%). This may point to the need for multidisciplinary teams (including HR, tax, mobility, immigration, employment law, data privacy) to holistically consider tax, legal, and regulatory risks of international remote working and associated guardrails to protect the business.
International remote working is still a relatively new concept in the global tax landscape, so it is not surprising that the respondents showed some appetite (79%) for OECD input on harmonization of tax rules, provision of clearer guidance and simpler administration.
Climate and sustainability create new obligations
Climate and sustainability matters remain high on the agenda, with most respondents (83%) expecting ESG initiatives to impact their tax function.
Businesses will be directly impacted by a range of environmental taxes. Most respondents (84%) expect the greatest impact from taxes on energy consumption, with a third expecting only a minor impact from taxes on waste and pollution.
Almost 80% of the respondents expect to be impacted by the EU Carbon Border Adjustment Mechanism (CBAM), which brings, in our opinion, a number of challenges, such as increased compliance costs, complex legislation, and limited guidance.
The survey exposed a tension between expected benefits of carbon-pricing regimes in principle (such as, climate change mitigation, clear technologies) and the challenges of how these regimes are administered in practice.
“If we are going to rise to the challenges of the fast-changing tax environment we need to understand how businesses are actually responding. Deloitte’s 2024 Global Tax Policy Survey gives us invaluable insight into how the major tax policy themes are playing out in the real world,” adds Willem Blom, Deloitte Global Leader. “Our task now is to work with organizations on a global scale to shape effective responses and bolster their strategy, talent, and technology to meet the challenge.”
