Taxes: The Rules Continue to Change and Tax Authorities Focus on Enforcement

The following post was originally included as part of our recently published memorandum “Selected Issues for Boards of Directors in 2021”.

In recent years, the international tax system has experienced significant change as tax authorities across the globe have adopted and implemented new rules and procedures to respond to the new economy and perceptions of taxpayers arbitraging differences among jurisdictions.

While this process has been partially delayed by special temporary tax measures enacted by governments in response to COVID-19, once these measures expire, tax authorities and policymakers can be expected to rapidly resume forceful enforcement initiatives and the introduction of further substantive law changes. We expect to see, in particular, an increased focus on how to tax companies engaging in digital transactions. While many of the rules enacted so far are intended to prevent deductions from being claimed in more than one jurisdiction and income from escaping taxation entirely, they may inadvertently result in taxpayers being subject to double taxation or whipsaw, particularly as the new rules are being adopted and implemented simultaneously and without coordination. Taxpayers will need to be vigilant, thorough and proactive to minimize their risks.