4 International Tax Trends Worth Watching in 2018

U.S. Federal Tax reform continues to dominate the strategic thinking of tax leaders in the United States and abroad, as foreign headquartered MNCs are also evaluating the impact of this reform on their U.S. operations. In the United Kingdom, for example, British American Tobacco Plc, Royal Dutch Shell Plc, and BP Plc have all indicated they will provide more detail later this year on how the new U.S. tax law affects their bottom lines, according to a BNA Bloomberg article. Although still evaluating, they have been able to conclude that it does appear to make the U.S. a more attractive place to do business, which could have some U.S. headquartered MNCs, especially technology companies, reorganizing their operating structures.

Although the intense focus on the new U.S. tax law is entirely justified today tax executives of both U.S. and foreign MNCs will want to make sure it doesn’t obscure other tax developments that bear monitoring this year. The article zeros in on four additional key developments to watch in 2018:

1. The digital economy. The OECD is still developing the digital component of its base erosion and profit shifting (BEPS) project. An interim report, slated to be shared at the April meeting of G20 finance ministers, should illuminate how the OECD intends to tackle the tax challenges posed by the accelerated digitization of business with the final report not due until 2020.
2. Global tax reports. BEPS article 13 covers country-by-country reporting and provides a template for multinational enterprises to report annually on all jurisdictions where they do business. With more than 40 countries reported as of year-end 2017 and others to follow in 2018, the question now is whether these reports will stay private, as required by the OECD guidelines. Because many tax executives are fearful that either new legislation or leaks will end up making this report public, some companies are taking to their own website to publish them with explanatory notes.
3. Tax and technology. Tax authorities and corporate tax departments alike are making increasingly sophisticated use of advanced technologies. For example, Vertex last year helped Duracell file the first successful electronic VAT return under Spain’s new SII requirements. Given these developments, it’s tough to disagree with Mariano Giralt, a tax executive with The Bank of New York Mellon Corporation, who is quoted in the article: “For me, a great tax professional no longer has just a technical knowledge of tax—they are also curious about digital transformation, and they understand things like the digital ledger, blockchain, artificial intelligence, data analytics and robotics.”
4. European Union. High-profile investigations into member states’ use of tax incentives to draw major multinationals is a trend worth keeping an eye on. Also worth watching: the Common Consolidated Corporate Tax Base (CCCTB) initiative, which seeks to establish a single EU-wide system for computing taxable income, instead of many different national rulebooks.

The critical role of the tax department of today is due to the dynamics of disruptors — global changes in legislation, technology, NGOs, media spin, etc. — which put even more pressure on tax not only to be able to manage tax liability and reputational risk, but also serve as a strategic business advisor.