Tax

The advent of pillar two in the international tax framework marks a significant shift in global taxation. Governments worldwide, whether developed or developing, grapple with the complex administrative challenges that the new order presents. To effectively assess and audit pillar two tax returns, tax authorities must have a comprehensive understanding of their domestic tax systems, international tax affairs, and intricacies of international accounting standards. Moreover, the sphere of deferred taxes, rooted deeply in book income, adds another layer of complexity that can't be overlooked. In this context, capacity-building and the simplification of compliance processes emerge as critical areas of focus.

The warning recently issued by a nonpartisan U.S congressional committee is reverberating throughout global financial spheres: the implementation of the Organisation for Economic Cooperation and Development's (OECD) pillar two model could cost the U.S. over $120 billion in lost tax revenue by 2033 if implemented in 2025.

As the global digital economy evolves and governments turn their attention to real-time reporting, the path to VAT compliance has taken a significant turn. Countries across Latin America, including Chile, Mexico, and Brazil, have embraced a digital-first approach and have become forerunners in continuous transaction controls (CTCs). While this innovative approach allows governments to have a clearer picture of their economies and reduces VAT gaps, it places a new set of demands on businesses that revolve around data management and reconciliation.

Article 12B of the United Nations (UN) Model Tax Convention has emerged as an intriguing development in international tax law. Passed during the 22nd Session of the Committee of Experts on International Cooperation in Tax Matters in April 2021, this provision introduces new possibilities and complications for global tax administrations.

As tax authorities across the globe tighten their Value Added Tax (VAT) enforcement measures in a bid to shift from economic recovery to sustainable growth, the implementation of Continuous Transaction Controls (CTCs) is taking centre stage. Despite its immense potential to reduce fraud, manipulation, corruption, and errors in VAT returns, the implementation of CTCs presents significant challenges, particularly for multinational enterprises (MNEs).

In the ever-evolving landscape of taxation, strategic planning has become paramount for businesses around the globe. Two distinct strategies are often the subject of discussion in this regard: Proactive and Reactive tax planning. While both strategies play vital roles, a growing preference for proactive over reactive tax planning has been observed.

The seismic shifts in the global economic landscape, catalyzed by increasing digitization, internationalization, and economic interdependence, have brought the relatively obscure subject of transfer pricing into sharper focus. This concept, which primarily concerns the prices at which goods, services, or intangible assets are exchanged between related companies in different tax jurisdictions, has taken center stage in the international tax landscape.

The OECD's Base Erosion and Profit Shifting (BEPS) initiative is a comprehensive international effort aimed at addressing tax avoidance strategies used by multinational enterprises (MNEs) to shift profits to low-tax jurisdictions. The initiative was launched in 2013 with the goal of creating a coordinated and consistent approach to prevent BEPS practices.