Tax in the digital age – ITR’s Asia-Pacific Guide 2022 launched

In collaboration with EY, ITR’s guide to the tax-related developments, challenges, and strategies in the Asia-Pacific region emphasises how connected the world has become.

The Asia-Pacific Guide 2022 identifies three ‘megatrends’ that are shaping the taxation environment in the region and worldwide: tax reforms under the OECD BEPS 2.0 initiative; environmental, social, and governance (ESG) considerations; and Web3 and the metaverse. Tax functions are only becoming more important as a result.

Certainty in tax has arguably become more elusive since the introduction of BEPS in 2013 and is an expectation of multinational enterprises given their greater administrative burden. However, clarification of the taxation framework is still required.

Against this background of stakeholder frustrations, summer 2022 featured a flurry of activity for the OECD Secretariat, including an encouraging progress report on the two-pillar solution to the issues arising from digitalisation.

C-suites are becoming more aware of tax challenges and are investing in technological solutions. Accordingly, enterprise performance management (EPM) is increasingly being used for tax purposes.

Such approaches will become necessary given that indicators are pointing to an increase in tax controversies. This is partly because of a greater information exchange between countries and enhanced data analytics.

There is evidence of a transformation of tax and finance functions, which has been accelerated by COVID-19. Operating models are being re-evaluated and many companies are using managed services as a result.

The importance of including heads of tax in strategic discussions is increasing, particularly in formulating ESG policy. Company executives must be aware of the tax implications of ESG-related decisions, and the incentives and credits in this area.

Tax should also be prominent in the thinking of companies that are considering entering or doing business in the Association of Southeast Asian Nations (ASEAN) region.

Drilling down to jurisdiction-specific developments in Asia, the Monetary Authority of Singapore is striving to position the country as a global digital asset hub while regulatory frameworks struggle to keep up with developments in the digital asset industry.

The insights offered by EY tax professionals in this guide have relevance not only across Asia-Pacific but also globally, as the world becomes ever more connected, and effective tax management ever more vital.