Given the rapid and turbulent changes now buffeting the tax function, this session offered and examined ten predictions to explore whether they may become reality and – if so – what the impact might be on tax directors.
10 Tax authorities will all co-operate globally Discussion: Countries are increasingly cooperating on tax – particularly in the more developed nations – and are exchanging a wealth of information in order to enforce and verify tax submissions. This trend will only increase in the future as more tax authorities move to protect a greater share of their revenues.
Verdict: Agreed – though some markets may be slow to integrate
9 The tax function will not have a seat on the board Discussion: With tax swallowing up almost 50 percent of corporate incomes in some countries, the importance of tax and tax strategies should be high on the boardroom agenda. But while tax will take up more of the board’s time, it will still fall on the CFO to represent the company’s tax position and activities to the board.
Verdict: Agreed – by 2020, tax will still not have a permanent seat at the boardroom table
8 The tax function will be dominated by experts who understand IT, systems and automation Discussion: As the pace of change increases and data becomes more readily accessible and reliable, many tax functions will start to depend more and more on IT, systems and automation.
Verdict: Agreed – but ‘dominated’ was thought to be a stretch too far
7 Tax departments will spend increasingly more time processing transactions and less time undertaking tax planning Discussion: As the demands of reporting start to take an increasing proportion of tax directors’ time and focus, and compliance becomes the top priority, tax departments and directors will find their focus shifting from tax planning to reporting and monitoring.
Verdict: Agreed – though hopefully tax planning does not suffer as a result
6 Tax affairs around the globe will be conducted in a 100 percent transparent environment Discussion: As demands for increased tax transparency continue to mount from stakeholders and the general public, tax departments and tax authorities will both become increasingly open – indeed proud – of their tax contributions, leading to greater levels of transparency.
Verdict: Undecided – certainly transparency is going to increase, but never to 100 percent
5 Across the globe, direct taxes will be on the way out Discussion: As a trend emerges for governments to increasingly rely on their indirect taxes such as VAT, consumption tax, customs duties and the like, governments will increasingly start to phase out direct taxes on income and profits.
Verdict: Disagreed – direct taxes are an important source of revenue and an important fiscal instrument for fiscal and social policy
4 New environmental tax laws will represent a significant risk to tax directors, as they construct global tax strategies in the future Discussion: The potential introduction of environmental tax laws will create new complexities and challenges for the tax department, particularly if a lack of global consensus leads to inconsistent practices and rates.
Verdict: Agreed – more so for those operating in carbon-intense industries
3 All nations, even the USA, will turn to centrally administered indirect taxes as the only politically viable way to deal with structural deficit problems Discussion: Facing yawning budget deficits and sluggish economic growth, countries like the US will need to turn to indirect taxes such as a federal VAT to reduce the shortfall.
Verdict: Disagreed – some nations will indeed implement more indirect taxes, though the political ramifications will be difficult to survive
2 Society will boycott businesses that avoid tax or who are seen to pay too little tax Discussion: With public opinion playing a greater role in the tax strategies and activities of companies, any company found to be avoiding taxes though aggressive tax planning will be named, shamed and likely even boycotted.
Verdict: Undecided – do not expect angry mobs protesting in the high street, but loss of trust due to tax can certainly contribute to reduced revenues
1 The European welfare state will no longer be viable from a tax perspective, due to fast-changing demographics Discussion: Aging populations, diminishing household incomes, population growth and rising healthcare costs will all conspire to make Europe’s welfare state unaffordable to fund through tax revenues alone.
Verdict: Undecided – pressure will certainly be added to the system but its total demise is not expected