Navigating the storm
expect to respond to further major transformation in the next three to five years
with UAE operations identified resourcing capacity as a top three concern
now have a relationship with tax authorities that is collaborative or excellent
are still having issues with tax data quality and tech systems
What a difference a year makes. In 2021 we described the tax challenges facing organisations in the Middle East as a ‘perfect storm’. The combination of the introduction of further local indirect taxes and well-funded, highly active tax authorities was placing increasing demands on multinational organisations in the region.
A year later, our second survey reveals that huge progress has been made. The responses of senior tax decision-makers operating in 12 jurisdictions across the Middle East reveal an increasing confidence in dealing with the demands of the evolving tax regime and a maturing relationship with tax authorities.
Our 2022 report charts this growth and the hurdles still to come - and pinpoints practical actions for businesses as we move into this next phase of change.
“It’s encouraging to see that organisations have worked hard to build trusted relationships with the tax authorities and have really invested in their tax functions in the face of enormous - and rapid - transformation.”
Tax departments in the Middle East have made huge progress in a relatively short period of time, rising to meet the demands of a rapidly developing tax environment.
This year, 47% told us they now consider their approach to the adoption of tax technology as either maturing or leading. This is remarkable progress compared to 12 months ago, when just 8% of companies described themselves this way, with most only just starting o grasp the level of investment needed in tax technology in order to keep up with the expected continuation of transformation.
But this is just the beginning. 79% of tax leaders expect the regional tax landscape to continue to undergo extensive change in the next three to five years.
As the tax environment in the region continues to evolve, tax departments need to swiftly shift from a compliance-focused mindset to take a more strategic, data-centric and technology-based approach.
Although significant issues for organisations remain the management of VAT and excise duty requirements in the UAE, KSA, Oman and Bahrain, along with adapting to the introduction of e-invoicing systems in KSA and Egypt - direct taxes are the next challenge, as jurisdictions seek to increase revenue and feel international pressure through the OECD Base Erosion and Profit Shifting (BEPS) initiative.
Tax functions must therefore not only manage compliance, but they may also need to undertake planning, develop PnL modelling, and manage stakeholders and investors. In other words, tax will become a strategic issue, commanding more attention than ever before from the rest of the c-suite.
Recruiting and retaining tax professionals with the right skills and a strategic mindset will be extremely challenging in the coming years. Demand for tax professionals across the world - not just in the Middle East - is high, as organisations grapple with an evolving global tax landscape.
60% say they will need a larger tax team with deeper expertise in data analytics, technology, planning, and strategic risk management skills. But organisations will potentially find themselves competing for the same resources in order to keep up.
“Good quality data is the oxygen that tax functions need to operate successfully – it ensures that compliance requirements are met, that risk is managed effectively, and generates meaningful insight for decision-makers.”
Tax professionals with strategic, technical skills are a scarce resource. Tax teams across the region are set to grow significantly in the coming years and will be competing with organisations across the world for the best talent.
Tax departments across the region have made huge advances in tech implementation over the past year. But while tax leaders understand the value of tax technology, continued investment is critical to keep pace.
Tax is rapidly becoming one of the most important elements of strategic decision-making. Tax teams will increasingly find themselves needing to be led by those with the right experience and technical expertise to understand and react to more complex tax transformation.
With a little over a year to go before UAE CT becomes effective, organisations with operations in the UAE are still assessing what the new tax will mean for their business, and for the bottom line. The reality is that the introduction of CT has wide-ranging implications for the tax function and the wider business, and will require serious investment in upskilling and an expansion of capacity for many inhouse UAE tax teams.
Middle East Tax & Legal Services Leader, PwC Middle East
Tel: +966 56 704 9675
Partner | TLS Tax Strategy & Transformation Leader, PwC Middle East
Tel: +971 56 385 4717
Partner , Tax, PwC Middle East
Tel: +971 56 177 7642