Merriden Varrall introduces KPMG’s new Geopolitics and Tax Unit.
It has been said often – we live in uncertain times, and this can impact our business.
Of course, political risk itself is not new. Many companies have been dealing with it for a long time. But today, change is coming faster, harder, and from more directions than ever. This means that navigating tax systems today is becoming far more complex than many of us have been used to.
Geopolitics is, at its heart, the study of the impact of geography on politics. Geography is not just mountains and rivers, although these physical elements are part of the picture. Geopolitics refers more to the impact of human geography: people, culture, communities, religion, access to resources, demography, and political systems are all critical components.
All of these factors create the political environment in which government policy – including tax policy – is made and enacted. Tax systems don’t just exist. They are constructed and operationalised according to the political context. They can, and do, change, as politics changes. While the basic function of tax remains to raise revenue, the design of what the OECD refers to as the overarching principles of tax policy are all political decisions. How much tax is collected, how and from whom, as well as how it is then spent, are all designed to achieve certain political outcomes. What constitutes a ‘public good’ depends on the political preferences of those in power.
And, as geopolitical circumstances change, as they are at dizzying speeds, this will have impacts on how tax systems look and function. This includes today, as well as the operations of the tax functions of the future.
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