The evolving role of Tax

Between active policy conversations in Washington and globally, and intensifying societal expectations, the role of taxes has evolved to become a catalyst for delivering trust and driving sustained business outcomes.

Massive tax change is again on the horizon. On Monday, proposed legislative language was released with significant implications for US taxpayers. Meanwhile, digital connections are expanding the global reach of companies, while at the same time the OECD and G20 are looking to reshape foundational tax principles that address how we tax companies in the 21st century global economy. 

In parallel, we are seeing a significant shift in the role of business. Edelman’s 2021 Trust Barometer found that for the first time, business is the most trusted institution in the world, overtaking NGOs, government and media. Businesses increasingly must demonstrate both why they’re trustworthy and how they are contributing. Tax reporting is a voluntary compliance system founded on the basis of trust, and the total amount of tax that companies pay is increasingly seen as currency in the trust debate.

At PwC, we are uniquely positioned to guide businesses as they navigate changing, and sometimes competing, expectations. Earlier this year, we launched our new global strategy -- The New Equation. It’s our response to two fundamental needs organizations are grappling with today: successfully responding to major shifts shaping the world and the need to build trust at a time when it is both more fragile and more complicated to earn. These two needs are deeply connected - and tax plays a critical role in helping companies deliver on both. 

A few takeaways for companies as they seek to understand the role tax can play:

• Building and maintaining trust: As society’s expectations of business continue to evolve, tax offers a way to demonstrate trust while threading the needle between business drivers and stakeholder demands. ESG expectations are changing the way companies approach their strategy, drive performance and report results. Total taxes are often the biggest factor in a company’s overall societal contribution, and transparency in this area is an avenue for companies to demonstrate their commitment to earning stakeholder trust.

• Putting tax up front: Now, more than ever, companies should be bringing tax to the forefront of every business and strategy conversation. Whether they are contemplating a restructuring, trying to drive broader digital transformation, or evolving their supply chain, each decision has tax implications. By factoring in tax up front, the tax discussion can be a catalyst for - rather a consequence of - strategic business decisions.

• Consider tax a driver of value:  The tax department is sometimes considered to be a back office function. However, activating your tax talent can be an area of immense value creation for your organization. By injecting tax into strategic business planning, the tax department can enable enhanced returns and ensure that business outcomes are appropriately measured on an after tax basis.

At PwC, we see tax as an area that’s on the cusp of significant growth. Through The New Equation we’re bringing tax to the forefront of more client conversations, helping our clients build trust and deliver business outcomes in a tax efficient way. By tying tax inputs to business outputs and leveraging knowledge and skill sets from across our firm, we are approaching tax issues more holistically and being more responsive to our clients’ needs than ever before. 

We have helped our clients through significant tax reform in the past, and we’ll be there for them once again as the new legislation evolves. Our clients are grappling with an increasingly complex landscape and conflicting pressures, and The New Equation uniquely positions us to add even more value by delivering strong business outcomes and building trust in a rapidly changing world.