Bosses fear political and economic uncertainty are increasing the risk of governments in several developed countries seeking to impose higher taxes.
President Donald Trump taking office in the USA and doubts about his telling the truth about links his aides may have with the Kremlin and the disastrous fall from grace of British Prime Minister Theresa May and her handling of Brexit talks are highlighted as two major geopolitical issues troubling executives of major companies.
Almost 60% of executives asked about their business sentiments by researchers for accountancy firm Ernst Young reported they felt risk or uncertainty about future global regulation and taxes was increasing.
The research also disclosed 40% were worried how their uncertainty seemingly increased over the past two years.
Seismic changes
Jason Lester, EY’s managing partner for tax, said: “Tax implications of Brexit and the uncertain direction of tax policy in the US have shifted the epicentre of tax risk away from emerging jurisdictions toward developed economies that are traditionally characterised by a more measured approach to risk.
“Until recently, emerging markets have been far more unpredictable for global businesses from a tax perspective, with the introduction of new tax rules in regions such as Africa and Latin America.
“Now, with seismic geopolitical change taking shape across the US, the UK and beyond, we are seeing a significant increase in tax risk and uncertainty and a move toward more imminent controversy in developed markets.
“This may be heightened by anticipation around prospective US tax reform, augmented by the effect of authorities having access to more information and developing more effective tools to collect revenue.”
Hamstrung over policy
Both the US and UK seem hamstrung over tax policy.
In America, Trump cannot make headway with his proposed tax review while doubts circulate Washington about his role in the sacking of FBI director James Comey and alleged interference in an investigation into if Russia influenced voting in his election.
In Britain, May is wrestling with dealing with Brexit and pushing her welfare and education policies through parliament with a minority government probably shored up by 10 Ulster MPs.
The EY report puts the US, UK alongside Australia, India and China as the countries facing the worst tax risks from their political and economic instability.
