The times they are a-changin'

16 December 2016

The first verse of the Bob Dylan classic implores “Come gather 'round people, wherever you roam, And admit that the waters around you have grown……then you better start swimmin' Or you'll sink like a stone”. So what is changing?

I’ve recently been reading the PwC Global Annual Review, which takes a look at the global economy and the trends that are shaping it. It’s clear from the review that navigating the business environment, globally and locally, has never been more complex.

The review notes that there is more focus than ever on the role and impact of business, and the greater need to be able to understand, plan for and then implement business strategies which reflect this dynamic environment. Not for many decades have the assumptions which underpin key elements of the global economic system been so challenged, with Brexit and the US election result being only part of a huge shift in the geopolitical landscape. Businesses must now carefully manage not only traditional technical complexity – tax, legal, operational, people-related and other – but also the broader political and indeed economic and social consequences of their business strategies and the impact of such change on them.

Governments too are adjusting and evolving, and their changing approaches will in turn have significant implications for taxpayers. Governments are working together via the OECD Base Erosion and Profit Shifting (BEPS) project to drive the most significant change in the global tax systems in generations.  But many are also evolving their local tax systems to respond not only to economic demands but also  the evolving nature of economic activity. Increasing numbers of countries are broadening their tax systems, with technology also playing an ever more influential role in the manner in which tax authorities engage with taxpayers.

To all of this, add the increased emphasis on transparency – a trend which will no doubt increase rather than decrease, again facilitated by technology. Finding the right balance between secrecy on the one hand, and privacy and confidentiality on the other, is already a hot topic in many places, but has particular resonance for us offshore in the Isle of Man as we try and ensure a fair landing for the beneficial ownership regime.

Accelerating technological change has been, and will continue to be, the most disruptive force with a proliferation of innovative technologies. In order to remain relevant and to succeed, an emerging technology strategy needs to be a part of every company and indeed every nation’s strategy. It is stating the obvious that the Island needs its own digital capability to be better than our competitors, which will take continued and significant investment by our Government and the private sector, potentially in partnership.

These are big changes, inevitably with more to come and almost all outside of our control. But an environment of such dynamic change also presents significant opportunities to those who are willing to evolve to respond. In the complex and ever-changing world of today our famed agility is needed more than ever. It is incumbent on all businesses to work with Government, to stay outward looking and treat the momentous change in the world around us as an opportunity to carve out new niches and attract new business and investment.

The ‘niches’ are likely to be harder to find and our proposition is necessarily broader and certainly less tax driven than it has been in the past. We therefore have to get the basics of people and technology right if we are to convert propositions that will no doubt be looking at alternative jurisdictions. The differentials will be more marginal and a compelling story on these fundamentals will score highly on any potential inbound case. There are welcome public and private sector initiatives in this space, but I would question if they could ever be enough? Really strong, well-targeted investment and ambitious incentives will be needed.

Predicting what changes are to come is impossible, let alone predicting what the consequence of those changes are likely to be. Throughout the song, Dylan’s incisive lyrics demands all levels of society "Government, Family, Writers & Critics”  to be receptive to change. An innovative and agile mindset will be needed across Government and industry together with heavy investment to put us in the right place to take advantage of the inevitable opportunity that will flow from the disruption and change in the world today.