Tax disputes are on the rise
Tax departments are increasingly included in strategic planning
A framework for taxing the digital economy is coming
Technology is key to keeping pace with tax changes
Digital taxation and the new administration are top tax liability concerns
State governments look to ecommerce sales for revenue
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The COVID-19 pandemic revealed the importance of an effective and agile tax strategy. This year, as jurisdictions look to recoup revenue, tax professionals are ready to transform their organizations to adapt to what lies ahead.
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2021 Tax Outlook Survey
Meeting disruption through transformation
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Total tax liability increased
in the last 12 months
BDO'S TAKE
As governments at the international, federal, state and local levels look to recoup lost revenue due to COVID-19, tax disputes and liabilities may increase. Businesses will need to take a total tax liability approach to optimizing their tax standing in order to minimize risks and costs.
Tax executives say tax liabilities are increasing. As governments face diminished revenues and a new administration takes office, tax authorities are cracking down, and the results can be costly.
Tax Liability and Disputes on the Rise
73%
Total tax liability will increase
in the next 12 months
70%
BDO'S TAKE
In 2021, tax executives will continue their vital work in business strategy and mitigating costs, while turning their focus from immediate cash savings to longer-term cost optimization. It will take a variety of tax strategies to achieve these goals.
Supply chain restructuring for more tax efficiency
43%
Property tax appeals
38%
Relaxed tariffs / duties payment extensions
35%
R&D tax
credit studies
33%
Top Strategies for Resilience
COVID-19 continues to present challenges to many businesses. Maintaining liquidity is key to survival. As uncertainty persists, tax departments will play a crucial role in ensuring business health. Here is how they plan to maintain resilience:
Tax as a Strategy for Resilience
Employee Retention
Credit
32%
BDO'S TAKE
While the OECD’s plan is yet to be finalized, it’s safe to say that shifting profit allocations away from the home country of the seller would be a major change for any business that sells digital products or services. Businesses may suddenly be responsible for paying taxes in many more countries and should prepare for how this could impact their total tax liability.
Tax authorities are looking to tax online transactions.
Some countries are acting unilaterally, but the OECD is crafting a global approach. Tax executives predict an agreement is coming soon.
Digital Taxation Goes Global
believe there is a need for an established international framework on taxing the digital economy
96%
say understanding the OECD’s work on digital taxation & global minimum tax is their biggest international tax concern
29%
#1 factor in total tax liability in 2021:
The potential impact of taxation of digital products and services
For tax departments to manage new legislation, shifting rates and changing regulation, having the right technology resources in place is crucial.
BDO'S TAKE
Digital transformation isn’t an overnight venture, but requires steady improvements aimed at optimizing both technology and tax processes. Tax executives should look first to the areas that will provide near-term ROI and prioritize not just investing in the technology itself, but also in ensuring their people can use it.
Technology Is Key for the Resilient Tax Department
claim technology and process limitations have affected their ability to keep pace with changes to tax regulation
91%
say the pandemic accelerated the digital transformation of tax
55%
rank identifying and implementing new technologies as their top investment priority
51%
Methodology
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The 2021 BDO Tax Outlook Survey polled 150 senior tax executives at companies with revenues ranging from $100 million to $3 billion. The survey was conducted by Rabin Research Company, an independent marketing research firm, from November through December 2020.
30
Methodology
Outsourcing
of specialized tax work
43%
BDO'S TAKE
Balancing opportunities with optimization is the middle market mantra. Changes to the marketplace mean new and untapped potential to seek advantage, but companies must ensure their operational and digital strategy reflect new realities before embarking on any strategic move or partnership.
BDO'S TAKE
Workforce strategy should lead with empathy and focus on enabling employees to reach their next level of potential. That starts with building and reinforcing an equitable culture with advancement opportunities for all and extends to optimizing work through technology. Dive deeper into what's next for work.
BDO'S TAKE
The middle market has been a model of flexibility, but stakeholders will scrutinize the long-term impacts of crisis on the entire value chain. Companies will need a holistic, transparent financial picture to help them mitigate risk, realize strategic growth and plan with more precision.
91%
91%
The 2021 BDO Middle Market CFO Outlook Survey is a survey of 600 middle market CFOs in the U.S. The survey was conducted by Rabin Research Company, an independent marketing research firm, in September 2020.
Methodology
Methodology
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BDO'S TAKE
While tech companies will change up their headcount this year, they are also focused on optimizing their teams through diversity and inclusion efforts, training, upskilling and investing in automation. The goal: a more productive and effective workforce that can meet the needs of a changing industry.
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