• David Linke, Leadership |

Tax issues have steadily climbed the CEO priority ladder in recent years, and our most recent 2021 KPMG CEO Outlook suggests a continuation of this trend.

With the breadth and depth of change coming to tax systems globally, their concerns are well-founded; the reputational, structural and financial stakes have never been higher, and global executives are seeing that. 

Unilateralism, uncertainty and public scrutiny amongst top concerns

Tax is amongst the top ten areas that CEOs identified as potential barriers to growth. Several factors are likely driving this concern, including the following three topics:

1. Risk of unilateral tax measures in an effort to drive post-pandemic recovery

Global executives recognize that many governments will likely look to increase their tax revenue to help fund economic recovery. For most organizations, this is of less concern if it happens on a multilateral, cooperative basis, but it becomes challenging for multinational companies when these measures happen unilaterally. Indeed, three-in-four (75 percent) of the CEOs surveyed said they believe the pressure that the pandemic has put on public finances increases the urgency for multilateral cooperation on the global tax system.

In the absence of such multilateral approaches, the risk to multinationals is that differing and urgent domestic needs and timelines can lead to unilateral regulation and new tax rules enacted on a national level, giving rise to increased complexity, uncertainty and potential double-taxation and disputes for multinational companies. This, in turn, could hinder their long-term growth and investment strategies.

2. Uncertainty as to the impacts of international tax reforms

While recent tax developments provide some hope for multilateral cooperation on tax, including the historic agreement by 130 countries in July 2021 as to a framework for the reform of international tax rules, and the October updates to this, they also bring about new and unprecedented challenges for organizations and their CEOs.

One example is the proposed Global Minimum Tax regime, which was highlighted by most global executives (77 percent) as a “significant concern” to their organizations’ growth goals. A major source of concern here is that there is substantial uncertainty surrounding how and when such a regime could be enacted across jurisdictions. While executives recognize it is likely to have major impacts on their business, they are left to speculate as to the specific implications and timing of those impacts.

3. Increased public focus on tax and the reputational risks of being misunderstood

CEOs are acutely aware of the growing focus on tax matters in the public realm. A strong majority (74 percent) of global executives surveyed recognize the strong link between the public’s trust in their businesses and how their tax approach aligns with their organization’s values.

As businesses aim to build back better, the research shows that 69 percent of CEOs are feeling increased pressure to report publicly their tax contributions as a part of their broader ESG agenda and commitment to demonstrating their organization’s contributions to wider society. 

Chief Tax Officers needed at the leadership table

Tax risk is a concern for CEOs in its own right, but it is also an undercurrent of so many of the other areas identified as potential threats to growth, as I have previously written about in response to past research in this area. In the most recent data, environmental / climate change risks, regulatory change and the rise of territorialism were all identified by CEOs as top threats to growth, and tax is once again a prominent factor in each of these, further underscoring the need to factor it in to organizational goals.

Now is the time for companies to ensure tax strategy is inextricably aligned to the organization’s broader risk, business and brand strategy. Leadership teams stand to benefit from engaging their Heads of Tax early and often in key business discussions, objectives and investments.

Tax leaders can help ensure a proactive approach is in place for adapting to the evolving tax landscape and emerging regulatory frameworks, engaging actively with regulators and tax authorities on key issues affecting the business, and integrating tax considerations into broader ESG and stakeholder engagement priorities in line with business goals.

More information and resources are available through our Future of Tax content and, within that, the ongoing Tax Policy Perspectives series.