For the American public, the November elections will resolve the questions of who will be President and who will control Congress. But for business leaders, many questions will remain unresolved, especially around the future direction of tax policy.
According to PwC’s latest Road to Election 2020 Pulse Survey of C-suite leaders, Tax risk is the top policy risk regardless of who wins the election (62% under a Biden administration vs. 39% under a Trump administration). Interestingly, non-US tax policy risk ranks lower (20% under a Biden administration vs. 17% a Trump administration). In contrast … when tax leaders were asked whether they see greater uncertainty arising from growing international tax policy changes, rather than potential US tax policy changes, a slight majority responded that they saw greater tax policy uncertainty arising from outside the US.
Whether your business faces policy risk in the US, internationally, or both, it’s clear that governments are facing increased fiscal demands related to the global pandemic. With that context, an overwhelming majority of tax leaders expect an increase in demand for global tax transparency -- and an increase in tax controversy -- in the coming years.
On the state level, these effects are often particularly acute, as states generally cannot deficit spend. These factors pose reputational as well as financial risks.
With tax policy developments top of mind for the C-suite in 2020 and beyond, it is important to assess risks -- and opportunities -- and communicate them effectively. A wait-and-see approach is no longer a viable option. As they plan, Tax leaders must take a “no regrets” approach, ensuring they consider a variety of potential policy permutations and emerging stakeholder needs.
Scenario planning and modeling are crucial to understanding potential impacts of policy changes on your business. Cash management is a significant issue for many businesses, and tax has emerged as a major component of companies’ cash positions.
With many fluid and interconnected variables to consider (election results, potential change in tax rates, changes to offshore income provisions, etc.), scenario modeling supported by technology is key to gathering reliable data and planning for a range of outcomes. To thrive amid uncertainty, Tax functions likely will need to invest in upskilling and automation, and evaluate which activities deliver the most value to the enterprise.
Companies can also manage reputational risk by responding to increased demands for transparency in a responsible way. Increasingly, business leaders are under pressure to understand the comprehensive tax burden their organizations shoulder, and to articulate that total tax burden to their key stakeholders.
Regardless of the election outcomes, tax policy concerns will remain a key C-suite focus. To thrive amid uncertainty, businesses need data-driven, technology-enabled tax planning that delivers a clear view for stakeholders of the impact of various policy scenarios, leaving no regrets.