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How tax leaders can use geopolitical volatility to help shape policy

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6 minute read 27 May 2025

Ongoing uncertainty presents a unique opportunity for corporate heads of tax to provide practical insights to tax authorities.

In brief

  • Tax leaders’ insights are vital as geopolitical and economic volatility shapes key decisions and policy responses.
  • By informing regulators and identifying trends, tax leaders can help shape resilient, future-ready tax frameworks.
  • Data analytics and digital tools can provide insights that inform policy discussions and support regulations that help to promote an efficient tax environment.

“A little uncertainty is good for everyone,” former US Secretary of State Henry Kissinger once asserted, highlighting how maintaining a degree of unpredictability can help prevent complacency in international relations.

But are there upsides to a lot of uncertainty?

For tax leaders in financial services, the answer could be yes.

Persistent uncertainty is likely here to stay, thanks to a perfect storm of global challenges such as US-China trade tensions, fluctuating tariffs, geopolitical rivalries, economic volatility, protectionist policies, cybersecurity threats, fragmenting regulations, and the push for a green transition. As these forces reshape international trade dynamics and prompt countries to rethink their tax strategies, governments and tax authorities are starting to see the need for adaptability and collaboration in tax policy. This fosters an even greater need for effective risk management and engagement with industry experts who can provide practical insights and data-driven perspectives.

Tax leaders and the future of tax policy

For tax leaders, this presents a particular opportunity to ensure that the tax system is designed appropriately. By actively participating in policy discussions and facilitating clarity and fairness in tax regulations, they can help to shape the future of tax policy in ways that not only support a more stable and predictable economic framework but also provide the foundations for businesses to grow.

The landscape of uncertainty

The current tax environment is shaped by several key forces that significantly impact tax strategy and compliance for financial services organizations. Understanding these factors is crucial for tax leaders as they navigate the complexities of the modern tax environment.

  • Geopolitical tensions: The ongoing war in Ukraine and the evolving dynamics between the US and China have created a climate of instability affecting international trade and investment. Protectionist policies are on the rise as countries seek to prioritize domestic industries, leading to increased tariffs and trade barriers. These tensions complicate tax planning for financial institutions already trying to adapt to shifting regulations and potential retaliatory measures from foreign governments.

  • Economic pressures: Rising inflation and fluctuating global growth rates further contribute to uncertainty. The energy transition, driven by the need for sustainable practices, adds another layer of complexity. Financial services organizations must navigate these economic challenges while considering their impact on tax liabilities and compliance obligations.

  • Regulatory shifts: Digital tax reforms, including the Organisation for Economic Co-Operation and Development’s (OECD) Base Erosion and Profit Shifting (BEPS) 2.0 rules, are transforming how multinational corporations approach taxation. Evolving compliance requirements mean financial services organizations must stay informed and agile in their tax strategies. The introduction of new digital taxation frameworks presents both opportunities and challenges, requiring tax leaders to reassess their approaches to compliance and reporting.

These factors uniquely affect tax planning and decision-making in financial institutions. The interplay of geopolitical tensions, economic pressures and regulatory shifts create a complex environment that calls for tax leaders to be proactive and strtegic.

Turning geopolitical uncertainty into reform

Governments and tax authorities are increasingly open to enhanced collaboration, recognizing the gaps that rapid changes create in their understanding of complex tax issues.

Tax leaders can demonstrate their value as trusted advisors by leveraging their expertise to offer practical, data-driven insights. By engaging with policymakers and providing informed perspectives, they can contribute to the direction of tax regulations in ways that align with the realities of the financial services sector.

How tax leaders can engage on tax policy

  • Engage in discussions around digital tax reform or the implementation of a global minimum tax. By sharing insights on how these policies could impact their organizations, they can help ensure that regulations are designed with a clear understanding of their implications.

  • As trade tensions continue to influence cross-border taxation issues, tax leaders can actively represent their organizations' interests in policy discussions. By engaging with policymakers and providing insights on the implications of proposed regulations, they can contribute to tax policies that are fair and conducive to business operations, ultimately fostering a more stable and predictable tax environment.

  • Financial institutions have access to vast amounts of data that can be used for tax data analytics to predict and navigate tax risks. Tax leaders can demonstrate how advancements like e-invoicing can provide valuable data to tackle tax issues and inform future controversies. This data can enhance compliance efforts and data-driven tax strategies that ultimately lead to better decision-making in an uncertain environment.

How EY can help

Navigating global tax reform initiatives

As tax leaders engage with policymakers, they must also strategically navigate global tax reform initiatives, such as the OECD's BEPS 2.0 framework. To effectively contribute to these reforms, tax leaders should conduct a thorough impact assessment to identify how specific provisions will affect their organizations. This involves not only understanding compliance requirements but also anticipating potential challenges and opportunities that may arise from the reforms. By actively participating in consultations and leveraging industry coalitions, tax leaders can support regulatory adjustments that align with their organizations' operational realities.


Furthermore, developing a proactive communication strategy to inform stakeholders about the implications of these reforms can help to position tax leaders as trusted advisors within their organizations, ensuring that tax considerations are integrated into broader business strategies.
 

Addressing the rise of subjective taxation

The trend of subjective taxation, where tax authorities impose penalties based on perceived behaviors rather than objective criteria, poses significant reputational and compliance risks for businesses. Tax leaders must proactively address this challenge by implementing robust risk management strategies. This includes enhancing transparency in tax practices and fostering open communication with tax authorities to clarify expectations and help to reduce ambiguity.


Additionally, tax leaders should support clearer guidelines and objective criteria in tax assessments, engaging with industry groups to push for reforms that minimize the subjectivity in tax administration. By doing so, they can not only protect their organizations from potential penalties but also contribute to a more equitable tax environment.
 

The role of technology

Tax leaders can often streamline processes and enhance operational efficiency by adopting advanced digital tools for compliance, data analysis and reporting. They can also leverage data analytics to gain insights that can help inform tax strategy and decision-making.


Tax leaders should consider investing in technology that enables real-time data sharing and collaboration across departments, which can help to allow for more agile responses to regulatory changes. Moreover, by utilizing technology to automate routine tasks, tax functions can focus on strategic initiatives that drive value, helping their organizations adapt swiftly to the evolving tax landscape while assisting compliance and reducing risks. 

Emerging trends

Looking ahead, tax leaders should be acutely aware of emerging trends that may significantly impact their organizations. The evolving landscape of digital currencies is one such trend, as regulatory bodies work to establish frameworks for classifying and taxing these assets. Tax leaders should consider how they prepare for potential implications related to cryptocurrency transactions, including compliance with reporting requirements and understanding the tax treatment of gains and losses. Actively engaging with industry experts and participating in discussions with regulators will be essential to help navigate this complex and rapidly changing terrain effectively.
 

Sustainable tax policy

The increasing impact of climate change on tax policy is another critical consideration. As governments worldwide implement strategies to combat climate change, tax leaders should anticipate new environmental taxes, carbon pricing mechanisms and incentives designed to promote sustainable practices. Tax leaders can play a proactive role by advocating for balanced tax measures that encourage sustainability while ensuring that businesses remain competitive.


Additionally, there is a growing emphasis on social equity in tax initiatives. As public pressure mounts for governments to address income inequality, tax leaders should be prepared for potential reforms aimed at increasing taxes on high-net-worth individuals and corporations. This may include discussions around wealth taxes or changes to capital gains taxation.
 

Tobey Schumacher, US Global Compliance and Reporting Leader, Ernst & Young LLP and Jenny Coletta, Financial Services International Tax and Transaction Services Leader, Ernst & Young LLP have also contributed to this article.

Summary

The current geopolitical and economic uncertainty presents a unique opportunity for financial services tax leaders to contribute to the future of tax policy. Leveraging proactive engagement, scenario planning and data-driven insights can help tax leaders navigate the complexities of the modern tax landscape. As they take on a more strategic role, tax leaders should remain engaged in the ongoing dialogue around tax policy and support clear, predictable regulations that foster growth and innovation.

The path forward may be challenging, but with the right approach, financial services tax leaders can turn uncertainty into opportunity, helping position their organizations for success in an evolving tax landscape.

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