How three global trends are shaping indirect tax

Trade disruption

Indirect taxes are inextricably linked to supply chain activities and global trade. Changes in the ways that companies do business have a profound impact on these taxes. Equally, changes in these taxes may have a profound effect on companies' supply chains. A clear theme of the past year has been trading disruption. The war in Ukraine has contributed significantly to this, but it has not been the only factor. Trade disputes, new trade agreements and alliances, a rapidly changing regulatory environment, and the ongoing effects of the COVID-19 pandemic have all contributed. The trade function has never been so much in the spotlight – nor has it had such a significant opportunity to contribute to the performance of the organization.

Sustainability

The climate crisis and the need to protect the environment and human health are high on the agenda for governments, corporations and citizens worldwide.

Increasingly, governments are using indirect taxes to drive their environmental, social and governance (ESG) policies. Indirect taxes are raising revenues to help fund green policies. And new green taxes are encouraging citizens and businesses to make the necessary changes to meet sustainability targets. This large and ever-evolving group of taxes creates pressure on tax and trade functions. They must understand what taxes apply to their businesses, how to meet their obligations and also factor them into supply chain decisions and costings. They can, for example, help to reduce costs, mitigate compliance risks and identify opportunities for grants and incentives to fund green investments. But the pace and nature of these changes can often leave indirect tax teams unclear about their role and responsibilities – making it hard to act effectively.

There has never been a better opportunity for indirect tax leaders to add value to their organizations. They can affect change and achieve results by using their skills, building relationships internally, and employing innovative tech.

They must also consider the bigger picture and how the overarching global trends of global trade, transformation and sustainability shape the indirect tax function. This is the first of a four part series of articles that dive deep into each trend to help leaders frame the indirect tax discussion within their business, navigate the challenges and grasp the opportunities.