Global tax policy: searching for stability and certainty
Jan 8, 2025
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Will Morris, PwC’s Global Tax Policy Leader and former Director of Global Tax Policy at General Electric, shares insights on the intricate world of global tax policy. He discusses the intersection of tax and trade, emphasizing the need for a cohesive strategy amidst geopolitical shifts. Will also delves into digital services taxes and their potential impact on multinational corporations. The conversation touches on Pillar Two, highlighting how the UnderTaxed Payments Rule could reshape the landscape, and the evolving role of the UN in global tax reforms.
The implementation of the Pillar 2 engine revolutionizes tax compliance, streamlining complex calculations for multinational corporations amidst evolving global tax policies.
The rise of Digital Services Taxes (DSTs) presents significant challenges for U.S. multinationals, highlighting the necessity of adapting to varying regional tax frameworks and potential retaliatory actions.
Deep dives
The Impact of Pillar 2 in International Taxation
PwC's Pillar 2 engine is transforming tax compliance and modeling by utilizing a cloud-based centralized rules engine designed by global tax experts. This innovative tool simplifies complex calculations needed for compliance under international tax guidelines, offering immediate benefits to multinational corporations. By integrating over two decades of tax technology experience, the Pillar 2 engine aims to streamline tax provision processes, thus enabling firms to better navigate the intricacies of global taxation. The tool is now available as a service for businesses seeking to enhance their Pillar 2 compliance efforts.
Navigating Uncertainty in Tax and Trade Policies
The current global environment presents significant uncertainty in tax and trade policies, particularly with the potential election of Donald Trump and its implications for tariffs and taxation. Tax executives are encouraged to bridge communication gaps between various departments, ensuring that impacts of tariffs on supply chains are understood and conveyed to stakeholders. Understanding that tariffs can influence transfer pricing, exit taxes, and broader tax strategies is critical for effective risk management. This interconnected approach reinforces the need for clear messaging within organizations when addressing how external macro factors will affect tax considerations.
Digital Services Taxes and the Future of Global Tax Standards
Digital Services Taxes (DSTs) are expected to proliferate globally, significantly affecting U.S. multinationals amid the declining prospects for OECD Pillar 1, particularly with the shift in U.S. political leadership. Historical contexts, such as France's DST that sparked threats of U.S. tariffs, highlight the contentious nature of these taxes and their potential profits for governments. As numerous countries adopt DSTs, businesses must prepare for both existing and future tax liabilities, as well as potential retaliatory measures. The ongoing discussions at a global level emphasize the complexity of establishing a cohesive tax framework, considering the variations in regional implementations.
Proposed U.S. Tax Legislation and Its Implications
Recent proposed legislation from the House Ways and Means Committee aims to increase income and withholding tax rates on foreign entities from countries implementing discriminatory taxes, including DSTs. Although the current political climate may hinder immediate enactment, the proposals signal potential future shifts in U.S. tax policy that could impact inbound investment and foreign secondments. Stakeholders need to remain vigilant, as there are pathways for such legislation to resurface, especially with a new Republican administration. Understanding the nuances of this evolving legislative landscape is crucial for businesses to assess and prepare for upcoming challenges related to cross-border taxation.
Doug McHoney (PwC’s International Tax Services Global Leader) is joined by Will Morris, PwC’s Global Tax Policy Leader and former Director of Global Tax Policy at General Electric to look ahead to potential global tax policy changes. Will enlightens Doug about the confluence of tax and tariffs, digital services taxes (DSTs), the importance of communicating with the C-suite, the fate of Pillar Two, how the undertaxed profits rule (UTPR) could change, the role of the UN and global tax, and the potential for a US legislation as a reaction to DSTs and the UTPR.
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