Taxation of the globalisation and digitalisation of the economy
Policymakers globally are seeking changes to the international tax framework to reflect the impact that globalisation and digitalisation have had on their tax bases. These changes will apply to all large international businesses, not just highly digitalised businesses.
The G20/OECD Inclusive Framework which is moving toward 150 countries has been reviewing the rules of the international corporate income tax system. The project is expected to come to fruition during 2020 with some political announcements at the start of the year on progress.
However, a number of countries are moving unilaterally, either for the short term or longer to the extent that a global consensus is not reached. Distortions, uncertainty, and complexity could be created.
The resulting changes could have an impact on businesses’ effective tax rates, supply chains and business structures, compliance burdens, deal capacity, communications and reputation, and understanding the impact will be a priority for all forward looking businesses.
Base Erosion and Profit Shifting (BEPS) Action Plan
- The recommendations of the BEPS Project led by the Organisation for Economic Cooperation and Development (OECD) and published in October 2015 are at the root of much of the coordinated activity on perceived international tax avoidance techniques, although we’ll help you understand and input to how these are being nuanced with additional work.
- The timing, methods and extent of implementation vary between jurisdictions and our extensive network will help all stakeholders plan how best they can react to proposals and recommendations.
- We can help businesses identify significant risk areas and begin remediation as required, based on current actions of tax authorities and the future impact of OECD work.
- Our people, information services and insights will monitor for you the domestic impact of BEPS work – especially on behavioural changes.
DAC6: The new EU directive on cross border tax arrangements
What is DAC6?
- DAC6, the new EU directive in relation to cross-border tax arrangements, has been in force since 25 June 2018 and is currently being transposed into national laws by the EU member states. (Click here for further information on the timeframes)
- DAC6 applies to cross-border tax arrangements which meet one or more specified characteristics (hallmarks), and which concern either more than one EU country or an EU country and a non-EU country.
- DAC6 introduces a reporting obligation for intermediaries and taxpayers, depending on the set up of the arrangement and local law.
We can help businesses understand the relevance and importance of DAC6, and the need to act now.
EU Direct Tax Group
- Our pan-European network of EU law experts combine their skills to advise in all areas of EU direct tax law, including the fundamental freedoms, EU directives and State aid rules..
- We have set up client-facing expert working groups to address specific hot topics such as State aid, BEPS, Code of Conduct and CCCTB.
- Through our EUDTG Technical Committee, we continuously develop new and innovative EU law positions and solutions for practical application by clients.
- We input to the EU and international tax debate and maintain regular contact with key EU and OECD policy-makers through our EU Public Affairs capability in Brussels.
- We facilitate the "EBIT" business initiative.
- Our secretariat in the Netherlands operates an EU tax news service, keeping clients up to date with developments as soon as they happen.
We are a UK-based team specialising in supporting governments and international development agencies in analysing, building and implementing the private sector and development organisations across the world in all areas of fiscal and economic policy.
Many of the team have previously worked directly for finance ministries, tax authorities, policymakers and international financial institutions, therefore offering a deep understanding of the concerns and preoccupations of key governmental stakeholders.
Some of our recent projects have involved:
- Improving the efficiency of public services by introducing new budget oversight and performance management procedures,
- Reforming public financial management processes, enabling governments to align public spending with its longer-term strategic plan,
- Introducing new tax, policy and governance initiatives in order to increase the transparency of public finances, oversight and encourage citizen engagement,
- Supporting the finance ministry of a resource-rich country as it adjusts to lower commodity prices and forecasting the impact, and
- Helping a revenue authority in a key emerging market to model its informal economy
Tax & transparency
Tax and its impact on corporate reputation is a key issue for business while tax transparency, reporting and the tax gap are vital to other stakeholders like governments, supranationals and NGOs. Areas where we work with to help improve transparency around tax in a national context, and globally are:
- Tax transparency: country-by-country reporting
- Building trust, enhancing reputation
- Total Tax Contribution
- The annual Paying Taxes study
- Effective tax rate benchmarking
The future of tax
- When we look to the long term future, many of the challenges and opportunities that we see ahead, both for tax and more generally, can probably be grouped into categories which deal with shifts in economic power, demographic shifts, technological change, greater urbanisation and climate change/ resource scarcity.
- There are trends that we see ranging from the current to the more medium term. We’ve now started to raise some of these trends through our regular Tax Policy Bulletins and alerts from specific networks, including for example those stemming from the Base Erosion and Profit Shifting (BEPS) Action Plan, EU fiscal State aid and those around the likely growth of cooperative compliance in many territories. Our annual Paying Taxes report also provides trends in key elements of tax compliance around the world.
- Technological advances are driving huge interest in how different the tax function of the future will look and operate, along with the impact on systems of step change developments like blockchain, robotics and artificial intelligence.
- PwC is also interested in understanding and promoting debate on what people really want from their tax regime.
Tax Policy Bulletins
- Keeping up with the increasing pace of change surrounding tax policy and administrative developments worldwide can be a real challenge.
- Drawing on our experience of tax policy issues and insight from relationships with organisations such as the OECD, we have put together a series of Tax Policy Bulletins. These are more than just insights or thought leadership, but are a fundamental part of our tax policy services.
- With analysis and insight on policy changes around the world, these bulletins are designed to help you stay up-to-date with the latest developments and explain what these changes mean for you.
Supranational organisations and other stakeholders
Our Tax Policy Network regularly liaises with the Organisation for Economic Cooperation and Development (OECD), centrally, regionally and in relation to specific jurisdictions (including through Business at OECD, formerly BIAC). This also covers the various committees that have evolved from OECD work, like the Forum on Tax Administration (FTA), the Global Forum on Tax Transparency and Exchange of Information; and the Forum on Harmful Tax Practices (FHTP).
We review and respond to papers from the Platform for Collaboration on Tax and/or its other members: the United Nations (UN), International Monetary Fund (IMF) and World Bank Group (WBG).
Outputs from the Group of 20 (G20) are framed by the then Presidency country for each 6-monthly term, reflecting members agreement on views including those on tax from its subsidiary groups like the T20 (technical focus) and B20 (business focus), to which we input, as well as the OECD. The G7/G8 major countries and G24 Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development similarly form views on some tax issues.
Regional country alliances often cover political and economic cooperation, including some tax matters. The European Union (EU) is one example, but others are the Gulf Cooperation Council (GCC) and the Association of Southeast Asian Nations (ASEAT). We interact on tax with the various institutions that form these organisations as well as tendering for research largely through out Fiscal Policy team.
Tax administrations come together in regional groups for which PwC Firms from the area join with other PwC tax policy specialists. This extends this type of collaboration beyond the 50 or so members of the FTA above. These include ,for example, the African Tax Administration Forum (ATAF), Inter-American Center of Tax Administrations (CIAT), Intra-European Organisation of Tax Administrations (IOTA) and Study Group on Asian Tax Administration and Research (SGATAR).
Other tax policy stakeholders that we seek to engage with include bodies of professional tax practitioners (and tax committees of wider trade bodies), non-governmental organisations (NGOs) and the public, speaking through various organs including the media.
Impact of COVID-19 on tax policy
COVID-19 presents significant challenges to people and organisations around the globe and the disruption continues to evolve. After the initial response measures, COVID-19 will have medium and longer term implications for the way that governments, tax administrations and businesses move from crisis response into the recovery phase and resilience/structural considerations..
- Navigate Tax, Legal and Economic Measures in response to COVID-19. To help you cut through the complexity, PwC's team of specialists collaborated to create a resource for you to stay abreast of the changes that impact your business. Explore the latest response by territory.
- The OECD has provided guidance and analysis to help address challenges in the application during the pandemic of transfer pricing rules and double tax treaty issues concerning permanent establishments, residence and employment income. Explore our Tax Policy Bulletins.
- The large increases in borrowing to fund the crisis measures will have an effect on inflation rates and taxes but it is too early to say what these will be. We do know, however, that big businesses will be impacted and their tax contributions may be closely scrutinised. Look beyond corporate income taxes.
- The COVID-19 crisis has led to a general reassessment of the European Commission's program, but the Commission is not expected to delay its most important tax-related projects. Initiatives on ‘Fighting tax evasion’ and ‘Business taxation for the 21st century’ are strategic priorities. Explore our Tax Policy Bulletins
- It is important to begin considering how tax policy will be affected by the impacts the virus has on elements of domestic and global tax systems. These might include territories’ tax revenues, restructuring of business and countries value chains, and future ability to pay. A reassessment may be needed of what is taxable and where given the sustainability of different taxes as well as the choice between consolidating existing regimes, fulfilling projects based on the old norms, and advancing initiatives that might otherwise have remained in the conceptual stage for the near future. Explore our Tax Policy Bulletins and COVID-19 will force a major rethink of tax systems
Environmental and green taxes
Tax policy makers, globally (OECD, EU) and domestically, are increasingly focusing on their members’ or countries’ contributions to environmental and green agendas. Tax measures that countries have implemented or are considering include: carbon taxes, green tax incentives, and carbon border adjustments. At the same time, companies are seeking to measure and reduce their carbon footprints, evaluate climate change risks, and communicate this information with investors, employees, customers, regulators or more widely.