Companies actively nurturing prospects that can drive growth don’t want to proceed in a vacuum. They know that the US recovery, and their own particular odds for success, rest to a degree on the policy priorities the general election in November will help set in motion -- but likely not settle for good. There’s a high degree of policy uncertainty affecting strategic decision-making.
For example, PwC’s latest Pulse Survey shows that potential tax policy shifts and heightened trade tensions with China weigh heavily on the minds of most business leaders, regardless of the general election outcome. Details matter greatly, given the impact of any change to tax or trade rules on cash flow and investment decisions, and the gulf that separates the presidential candidates on these and other major issues.
So how can companies make well thought-out choices about where to allocate their time and money while dealing with policy unknowns?
57% of executives in our poll said they will step up efforts around tax planning under a Biden administration and 45% will increase their focus on supply chains if President Trump is reelected. But keep in mind that the next administration’s ability to shape policy will be influenced by the makeup of Congress as well as economic conditions and the pandemic’s trajectory. Companies should model against multiple scenarios to help reduce uncertainty, allow for no-regrets planning and generate insight to drive business forward.
The economic fallout from COVID-19, from business shutdowns to unemployment claims, is decreasing tax revenue for state, local and international jurisdictions. Meanwhile, demands are growing on the private sector to create domestic jobs and pay their “fair share” of taxes. In this environment, companies should be prepared for the likelihood of stricter enforcement by tax and regulatory authorities. Be sure to understand the economic, political and societal contexts in which you operate and that your tax and regulatory compliance functions are robust enough to respond to current regulations as well as sudden shifts in policy.
When the pandemic struck, companies quickly adopted new ways of working to keep operations running while protecting the health and safety of employees. Now as they gradually reopen offices, businesses must continue to challenge themselves to think differently about where and how work gets done and imagine new roles for people. This is an opportunity to implement new digital and flexible models of working that can boost productivity and employee experience at the same time.
Companies’ revenue outlook is improving, in part, because they’ve accelerated their digital journeys. The pandemic has fueled rapid cloud migrations. As companies modernize apps and tasks, they’re positioned to strategically leverage data and analytics to revamp business models and introduce innovations to engage customers in new ways. The momentum is likely to sustain. Half of the respondents in our survey say they will continue to invest in digital capabilities to drive top-line growth and achieve productivity gains.
Those that keep their underlying business strong -- including maintaining their cash and liquidity positions -- while strategizing about how to engage customers in this changed environment can emerge stronger. Alongside digital transformation, companies have offered enhanced or repurposed products and services, reached new customer segments and changed pricing strategies to drive revenue growth in a tough environment. This is a time to develop a specific point of view on the potential policy implications for new revenue streams. Compare and evaluate, not only what you think is going to happen in the US, but the international tax and regulatory environment.
Policy shifts related to tax and trade impact strategy, operations and competitiveness. Expect C-suite leaders, who have been navigating shared challenges over these past few months, to step up collaboration in managing tax and trade-related opportunities that will be critical to driving growth.