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“The impacts of major disruptive forces on tax policies and tax systems affect trust and competitiveness as much as revenue. Understanding that link is essential for every global business.”
Across the world, governments are changing how they raise revenue. Five forces - AI, government fiscal strain, geopolitical fragmentation and protectionism, populism, and the climate transition - are driving this shift, each reshaping the business landscape and the way value is created, captured, and taxed.
As a result, a new tax order is emerging that rebalances how and where value is taxed, who bears the burden, and how tax systems connect to wider goals of growth, trust and sustainability. Fiscal systems are becoming more digital, more transparent, and more complex than ever before.
“As expectations on transparency rise, businesses must earn trust not only through tax compliance but through clear reporting of their societal contribution.”
For business leaders, tax is becoming even more a barometer of change, an instrument of competitiveness, and a lever for resilience and trust. Below is a summary of how the five forces are transforming tax policy and, with it, strategic imperatives for business.
AI and digital transformation
Artificial intelligence is breaking the link between value creation and physical location, prompting governments to seek ways to tax virtual value.
Governments are responding with new digital and data taxes while using AI to enforce rules in real time. In addition, governments are offering major incentives for strategic tech sectors such as semiconductors and clean data infrastructure.
Businesses that treat data accuracy as a fiscal asset (critical as AI examines company data to calculate tax) and integrate tax foresight into digital strategy will stay ahead.Demographic and fiscal pressures
Ageing populations, high debt and rising spending demands are putting public finances under strain.
Expect governments to broaden tax bases, expand minimum corporate taxes and tighten enforcement.
Companies need a clear view of how these shifts could affect profitability, investment decisions and reporting transparency.Geopolitical fragmentation
As the world reorganises into regional blocs, tax policy is becoming a tool of industrial strategy.
Tariffs, local credits and reshoring incentives are redrawing global supply chains.
Business leaders should plan for a world of increasingly fragmented tax regimes and use scenario planning to test where to build, produce and source.Populism and the politics of fairness
Economic inequality and public scrutiny are pushing governments to target perceived winners, from multinationals to high-growth sectors.
Transparency, reputation and purpose now influence tax treatment as much as technical compliance.
Trust and narrative matter. How companies explain their contribution to society can shape their fiscal and social licence to operate.Climate transition
Despite some political pushback, many fiscal systems are being redesigned for a net-zero economy.
Expect wider carbon pricing, green tax credits and penalties for high-emission assets.
Tax is fast becoming a primary tool to finance the transition and attract sustainable capital.
The bottom line
The five forces are redefining how we move, build, fund and power the economy. Together, they are putting trillions of dollars of value in motion and reshaping how businesses create, capture, and are taxed on value.
For business leaders, tax signals how governments are shaping those flows of value. As tax policy becomes more volatile and complex, the winners in the new tax order will be the companies that link tax foresight to strategy, investment and trust. Those that do will not just stay compliant. They will gain competitive advantage.
Next, we explore each disruptive force and its tax policy implications in depth.
Chapter 1 AI is forcing a rethink of how to tax – and providing some of the solutions
Artificial intelligence is forcing governments to rethink the very foundations of tax policy. As value creation moves into digital ecosystems, the traditional link between activity and location is dissolving.
Governments are responding on two fronts: designing new ways to tax digital value and using AI to automate enforcement.
Impacts on tax policy
Very likely – Expansion of digital and data taxes targeting online platforms and cross-border transactions
Very likely – Growth of AI-enabled tax filing and real-time enforcement systems
Likely – Targeted tax incentives for strategic digital industries such as AI and semiconductors
Possible – Early experiments in taxing AI’s “labour” or automated output
What this means for business
AI is redrawing where and how value is created. As platforms monetise data across borders, questions multiply: which country owns the right to tax the value - where data is generated, stored, or consumed? Governments are taking action, introducing unilateral digital service taxes and tightening rules on digital income.
At the same time, tax authorities are using AI to analyse vast datasets, cross-check disclosures, and automatically calculate liabilities. This shift is turning annual filings into continuous, data-driven interactions between companies and governments.
For business leaders, data accuracy now determines fiscal exposure. Tax, finance, and technology teams must align to ensure that what a company reports is consistent with what its systems reveal.
AI also brings opportunity. Many governments are deploying powerful tax incentives to build domestic capability in digital and high-tech industries. Businesses that align investment and reporting strategies with these incentives can turn fiscal change into competitive advantage.
Partner perspectives
“Digital fundamentally changes where and how value is created, and policymakers haven’t yet solved how to tax that new value.”
“Enabled by technology, governments are increasingly able to directly access company data and automatically calculate tax due, often in real time.”
“The government now knows more about your business than you know about your business. They have data not just on your company but on your suppliers, partners and competitors.”
Key takeaway
AI is transforming both sides of the tax equation. For governments, it enables new sources of revenue and transparency. For companies, it demands seamless data integrity and opens fiscal incentives for innovation.
Businesses that anticipate how AI will reshape tax policy - and how tax data will shape their reputation - will be best positioned to lead in the digital economy.
Chapter 2 Fiscal pressures are driving higher and new taxes
Governments are facing a severe fiscal squeeze driven by high debt, slow growth, ageing populations, and growing demands for spending on infrastructure, defence, and climate action. Policymakers are seeking new ways to raise revenue without stifling growth or sparking political backlash.
Impacts on tax policy
Very likely – Increases in business taxes and broader implementation of Pillar Two
Very likely – Intensified tax enforcement and litigation
Likely – Expansion of broad-based consumption taxes, including carbon and digital taxes
What this means for business
Business – perceived by some citizens as a fairer target for increased taxation – should prepare for potential tax rises and growing implementation of Pillar 2’s 15% global minimum tax. Consumption taxes may rise – even carbon taxes, despite political pushback - since these can raise revenue quickly from a broad base.
Enforcement will get tougher and litigation more common as authorities take a harder line on tax policy interpretation.
Partner perspectives
“Fiscal pressures are not limited to ageing, developed economies. Developing countries too are looking for resources to fund development. Everywhere, the old challenge is back - how to raise more tax revenue without compressing growth.”
“Financial pressures are causing tax policy to change quickly and unpredictably. Given the heightened risk and uncertainty, tax is now a boardroom conversation.”
“Some may hope that Pillar Two fades away, but it is here to stay. It’s prompting many CFOs to globally integrate their tax functions - with technology to back it.”
Key takeaway
Fiscal pressures are making the tax environment tougher for businesses with new vulnerabilities and, in all likelihood, new costs. Tax exposures are likely to rise, making proactive policy modelling more essential than ever.
Compliance will become more complex with stricter enforcement. Tax payments may rise even without policy changes as interpretations become more strict.
Chapter 3 Geopolitical tensions and protectionism drive a volatile and fragmented tax landscape
Geopolitical tensions are driving a surge in protectionist trade policies, regional economic blocs, and supply chain reshoring which are redefining global commerce - and with it, tax policy. Tax measures are being recalibrated to support national interests, secure supply chains, and address fiscal shortfalls.
These dynamics are accelerating a shift away from harmonised international rules toward more fragmented, state-centric tax frameworks. As economic nationalism intensifies, businesses must navigate a patchwork of shifting tax exposures.
Impacts on tax policy
Very likely – Rising tax nationalism and global tax fragmentation
Very likely – Tariffs / taxes or incentives to promote domestic industries and reshoring
What this means for business
The tax landscape is becoming more multipolar, volatile, and fragmented. Business leaders must continuously scan for policy shifts, adjust supply chains, and integrate geopolitical risk into fiscal planning.
Partner perspectives
“Prepare for a geopolitical future with multiple centres of gravity and a complex set of unilateral and multilateral policies to navigate.”
“Tariffs are likely here to stay beyond current administrations or changes of political party. Once tax collections come in, it’s hard to unwind. We are likely to face a world of growing economic fences between regions.”
“We will see much more litigation between countries because they do not always agree on the interpretation of international tax programs. Clients will get caught up in this and should prepare for uncertainty and legal challenges.”
Key takeaway
Expect fragmented and fast-evolving tax regimes. Model exposure continuously, using scenario planning to anticipate regional divergence and policy shocks. Build resilience to double taxation and disputes as treaty protections weaken. Reassess supply chain footprints and tariff exposure as reshoring incentives and protectionist taxes multiply.
Chapter 4 Populism drives an atomised tax landscape – with business potentially in the crosshairs
Populism driven by rising anti-globalist sentiment, migration pressures, and economic dislocation is reshaping the tax policy landscape. Governments are increasingly under pressure to tax perceived elites and multinationals more aggressively while expanding support for citizens and domestic industries.
Populism is driving more tax protectionism, more unilateral tax measures, and a greater focus on using tax policy to signal commitment to domestic priorities.
Impacts on tax policy
Very likely – Increased tax protectionism
Very likely – Tax rises (or cuts) to benefit citizens
What this means for business
Businesses should expect a more interventionist, fragmented, and unpredictable tax landscape. Governments may cut taxes for citizens while raising them for foreign companies, high-profit sectors, or wealth holders. Compliance burdens will rise as unilateral rules, incentives, and penalties proliferate.
Partner perspectives
“High net worth individuals and companies are sometimes conflated in the public eye when it comes to taxation – and both are in the crosshairs.”
“The fiscal position in most countries is not sustainable. It’s very hard politically to increase taxes or cut spending, so wealth taxes are more and more on the table.”
Key takeaway
The politics of fairness will continue to shape tax policy. Expect the tax targeting of perceived winners, from multinationals to high-growth sectors.
Tax treatment is no longer determined by compliance alone. Purpose, reputation, and impact on citizens also matter. The story a business tells about its economic and social contribution is central to securing fiscal predictability and licence to operate.
Chapter 5 Growing focus on sustainability despite political pushback
Governments are using tax policy to accelerate the climate transition, from rewarding sustainable investment to penalising high emission activities. Despite political pushback, structural forces are pushing the sustainability agenda forward: intensifying climate impacts, demand for energy and supply chain security, and fiscal pressures that make climate-linked taxes attractive.
Impacts on tax policy
Very likely – Growing incentives for sustainable investment
Very likely – Rising tax implications of mandatory climate disclosures
Likely – Tax penalties for non-sustainable activities and assets
Possible – Gradual expansion of carbon pricing
What this means for business
Businesses face a rapidly expanding set of climate-linked obligations and incentives. Governments are offering trillions of dollars in incentives for sustainable investment. At the same time, mandatory climate disclosures increasingly focus attention on material climate impacts, affecting financial forecasts and capital expenditure plans.
Pressure is rising on non-sustainable assets. Companies with carbon-intensive supply chains or negative environmental impacts will face growing financial and operational risks.
Partner perspectives
“As climate change hits harder and becomes more real to people, measures like carbon taxes become more likely.”
“The climate pushback in some quarters should not lead us to underestimate the change that is underway.”
“We expect more climate-linked tax incentives and grants. There is now an economic logic to these. Governments want to ensure a reliable supply of affordable energy – including to support AI.”
Key takeaway
The costs of misalignment with sustainability are rising, from direct penalties to foregone incentives. As sustainability-linked taxes are increasingly used as both carrot and stick, the business case for action grows. Expect increasing pressure from shareholders to navigate the web of penalties, incentives, and disclosures.
Chapter 6 Next steps for business leaders
“The new tax order is about choices. Leaders who link tax foresight with strategy will be well positioned to capture the opportunities of the next era.”
The new tax order will not wait for businesses to adapt. Companies that see tax as a signal of where value is moving, not just as a cost or compliance issue, will be better placed to position for advantage in a volatile tax landscape.
Here are five practical ways leaders can turn tax disruption into opportunity.
Anticipate tax changes
Build a tax policy forecasting capability to institutionalise horizon scanning.
Analyse the political, fiscal, and social pressures facing governments to foresee future tax shifts.
Join industry coalitions, share data responsibly and offer insights that help policymakers design better systems.
Build agility as a competitive muscle
Model alternative supply chains, sourcing and pricing strategies.
Scenario-plan policy futures so strategy flexes before new rules land.
Use disruption drills, just as you would for cyber or climate risk, to test how policy shocks would affect your business.
Strengthen data and tech foundations
Real-time taxation demands real-time data integrity. Ensure teams draw from one consistent source of truth.
Invest in tech / AI systems that enable transparency, anticipate how authorities will interpret data, and strengthen analytical capabilities.
Make tax part of strategic decisions
Tax reveals how regulation, reputation and capital flows connect.
Tax cannot sit at the end of the value chain, not least because tax is one of many businesses’ most significant financial obligations. Bring tax into the earliest stages of decision making, from new investments to supply chain shifts and sustainability plans.
When the tax lens informs the business model, decisions become more resilient and more capital-efficient.
Integrate globally, act locally
As tax enforcement and transparency increase, fragmented systems create risk.
A centrally coordinated tax function linked by technology and common standards allows faster, consistent responses to change, while giving local teams the agility to adapt to regional rules.
Key takeaway
Tax is now part of every major business decision, from where you build to how you earn trust.
Leaders who treat it as a window into political, social and economic change will not only stay compliant; they will see around corners and capture new value before others do.
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Contributors
Akhilesh Ranjan, Tax Policy Advisor, Price Waterhouse & Co LLP, India Allison Rosier, Global Asset & Wealth Management Leader for Tax & Legal Services, PwC US Charlotte Richardson, Global Health Industries Leader for Tax & Legal Services, PwC UK Chloe Fox, Global Tax Policy Director, PwC Ireland Chris Woo, Tax Leader for PwC Asia Pacific Christine Saliba, Global Consumer Markets Leader for Tax & Legal Services, PwC US Dallas Dolen, Technology, Media, and Telecommunications Industry Leader, PwC US Dieter Wirth, Tax, Legal & HR Services Leader, PwC Switzerland Edna Gitachu, Tax Policy Lead, PwC Kenya, and Africa Tax Policy Co-ordinator Edwin Visser, Deputy Global Tax Policy leader/ EMEA Tax policy leader, PwC Netherlands Elizabeth Stone, Global Financial Services leader for Tax & Legal Services, PwC UK
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James O’Reilly, Global Energy, Utilities and Mining Leader for Tax & Legal Services, PwC Australia John Livingstone, Tax Principal, Global Industrial & Services Leader for Tax & Legal Services, PwC US Kevin Levingston, Washington National Tax Services Leader, PwC US Marcel Jakobsen, Global Chief Technology Officer for Tax and Legal Services, PwC Netherlands Paul Lau, Tax Partner, PwC Singapore Paraic Burke, Head of Tax, PwC Ireland Pavan Kakade, Global Technology, Media and Telecommunications Leader for Tax & Legal Services, PwC UK Renate de Lange, Global Sustainability Leader for Tax & Legal Services, PwC Netherlands S. Ramesh, Managing Director of Indirect Tax, Price Waterhouse & Co LLP, India Sanjay Tolia, Partner and former Tax Leader, Price Waterhouse & Co LLP, India
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