• Colin Doyle CFO

More tax reform likely after election, say tax execs

The Tax Cuts and Jobs Act of 2017 made the most far-reaching changes in the Tax Code in over 30 years, but it’s far from the last word on tax reform, with 97 percent of corporate tax executives polled by BDO USA predicting more changes will come after the November election.

More than half (55 percent) believe more change will occur no matter who’s elected. Even though the Tax Cuts and Jobs Act passed over two years ago, adjusting to continued guidance on federal tax reform changes was the most-cited tax issue in 2020 by the tax executives surveyed, at 26 percent, according to BDO's 2020 Tax Outlook Survey.

While 88 percent of the tax executives polled believe a global framework is needed for taxing the digital economy, they named understanding the impact of the ongoing work of the Organization for Economic Cooperation and Development on digital taxation as their top international tax concern this year.

“While global standards around digital taxation are still in flux, they will undoubtedly have a significant impact on any business that sells across borders,” said Monika Loving, managing partner and international tax services practice leader at BDO USA, in a statement. “While these rules could bring some standardization to the patchwork quilt of current regulations, they could also multiply the compliance and reporting requirements for multinationals. Any business that conducts cross-border sales should pay close attention to the OECD’s work in the coming year and should map the effect potential scenarios would have on their overall tax liability.”

Company tax executives are trying to leverage technology to deal with all the changes, but 41 percent of tax executives say limitations in their tax technology have significantly impeded their ability to respond to new regulations. Nevertheless, 69 percent of the survey respondents said they are investing in identifying and implementing new technologies. One out of three ranked training professionals to use technology as the No. 1 challenge for their department. Seventy-three percent of the respondents said they are already deploying real-time monitoring technologies, and 67 percent are leveraging data analytics

Understanding their organizations’ total tax liability is key to optimizing tax strategy for the executives, and 83 percent of the tax professionals surveyed believe their companies’ total tax liability will increase this year.

Tariffs and trade wars are taking their toll on organizations. Despite agreements like the “Phase One” deal with China and the U.S.-Mexico-Canada-Agreement, 37 percent of the tax executives polled said trade tensions have had a high impact on their businesses. To deal with trade worries, executives have re-evaluated their supply chains (66 percent), increased prices (59 percent, applied for exemptions (56 percent) and altered their sourcing (56 percent).

An economic slowdown this year is also weighing on company tax executives. Three out of five of the tax executives polled indicated that they are “very involved” in planning for an economic slowdown, while 50 percent said they are always included in planning and decision-making.

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