Pivotal Elections in the UK and US Set to Shake Up Global Tax Landscape
This year, both the UK and the US are gearing up for important elections that could have far-reaching impacts on the global tax landscape. With potential economic and reputational consequences on the horizon, corporate finance and tax departments are left wondering how they can prepare for the storm.
The history of tax reform serves as a stark reminder of the potential for significant changes. When the UK voted for Brexit eight years ago, it sparked a massive shift in global tax policy. Major multinational financial firms were forced to make contingency plans and relocate staff, assets, and even headquarters to places like Frankfurt, Brussels, and Paris. As a result, the UK saw a sharp drop in tax revenue.
Complications also arose from the shift in Value Added Tax (VAT), which is a consumption-based tax applied throughout the production and sale of goods and services. The UK’s VAT system had been intricately linked to the EU’s common market structure, so when the UK left the EU, its VAT system had to be reconfigured to account for new customs duties and tariffs. This led to higher costs of imports and exports, causing concern for corporations and citizens alike.
In the US, we have also witnessed significant tax reforms. President Donald Trump’s Tax Cuts and Jobs Act (TCJA) brought sweeping changes to the tax code, only to be reversed by President Joe Biden’s Inflation Reduction Act (IRA) in 2022.
Looking ahead, experts predict that the second half of 2024 could see another round of tax-related volatility. Companies must ensure that their key stakeholders are well-prepared and have the necessary infrastructure to make real-time decisions based on accurate and comprehensive data, even in uncertain times. Compliance with new requirements will also be crucial, as failing to do so could make businesses a target and result in a reputational nightmare.
Given the high stakes, it is important for business leaders to focus on what they can control during times of change. For corporate tax and financial professionals, building a strong tax strategy will rely on data integrity, regulatory vigilance, and a quick and decisive decision-making process, even in the face of uncertainty.
Analyst comment
Neutral news.
As an analyst, the market can expect volatility and potential changes in the global tax landscape due to pivotal elections in the UK and US. Key stakeholders must be prepared with infrastructure and real-time decision-making capabilities. Compliance with new requirements is crucial to avoid negative consequences and reputational damage. Overall, businesses should focus on building a strong tax strategy based on data integrity and regulatory vigilance.
