In “Sustaining a Culture of Continuous Transformation in Family Business,” we explored how many family businesses responded to the global pandemic and how the actions taken during this period have resulted in a multitude of targeted and operational changes. Businesses of all types have had to reinvent their organizations, often based on the needs of the moment rather than a compelling vision of the future. To succeed in sustaining this reinvention beyond the climate of the pandemic, businesses will have to evolve, adapt and change continually, enabling them to gain competitive advantage.
As business models, supply chains and hybrid working relationships with employees continue to evolve, it is absolutely critical to consider the profound tax consequences for organizations in this fast-changing and dynamic world.
New business models and changes to supply chains have implications for direct and indirect taxes. For example, there will be a requirement for businesses to recover their intra-company trading terms to ensure that their transfer pricing arrangements conform with new OECD rules. Indirect tax and customs duties also need to be reviewed as businesses continue to develop new economic models. And multinationals that have revenues higher than EUR 750 need to be prepared to respond to additional reporting and disclosure requirements when the 15 percent global minimum tax is introduced in 2023.
Considerations for hybrid work environments
The rapid evolution of hybrid working has opened up new opportunities for companies to design innovative reward packages that will help incentivize and retain their teams while also attracting new employees. This has become an even higher priority during what the media has described as “The Great Resignation”. Family businesses are in a unique position to leverage their families’ purpose and values to sustain a work culture that is an incentive for the growth and retention of talented employees.
Overall, changes in working and reward models for talent need to be considered from a personal and corporate tax perspective, and proactively communicating these considerations to teams and other stakeholders is key to maximizing their impact.
ESG implications
New supply chains, business models and working arrangements all have ESG and tax consequences as well. It’s important that private companies’ tax affairs are not only conducted responsibly in line with the broader business goals of the organization, but that consideration is also given to the reputational aspects of any new strategies that are being pursued. A responsible tax strategy can support the ESG agenda and be a fundamental part of the company’s engagement with its customers, employees and other key stakeholders.
The landscape is shifting globally in the wake of COVID-19, and how private companies continue to adapt their businesses will determine how their companies thrive and evolve in a new reality.
The pandemic has demonstrated the agility and resilience of private companies. Many have performed and adapted well during the most challenging of times. While their executive teams and boards understandably focused initially on survival, they are now turning their attention to the rapid evolution of their businesses in a dynamic and fast-moving environment. Given these profound changes, it is now essential to consider the tax implications.
KPMG Private Enterprise Tax advisors around the world have extensive experience and benefit from a global network of professionals advising privately-owned companies including family businesses on all aspects of tax – from transparency to corporate, personal and indirect taxes and reporting.
Here are some of our suggestions for what to consider as you embark on your company’s evolutionary journey:
- What strategies can help to optimize your company’s overall business tax, income tax, and personal tax for compliance?
- What operational frameworks could be put into place to better manage the tax footprint of your business?
- Is there an opportunity ensure that new structures and business models in your company are maximizing the efficiency of the business in terms of both cash taxes and overall tax rates that are aligned with the broader business goals?
- Tax affairs should not only be conducted responsibly in line with the company’s broader business goals, but the reputational aspects also need to be assessed. Have you considered both the reputational and financial consequences of both your business and your tax strategy?
- Employee reward models need to be reviewed from a broader tax perspective on an ongoing basis given the rapid emergence of new work patterns. How are you ensuring that any potential tax issues are being addressed proactively and quickly?
- The reputational bar is often higher for privately owned companies, especially family businesses. Have you ensured that your tax strategy is aligned with your ESG strategy and supports the values and reputation of the business?
Sound tax advice is now more crucial than ever with private companies around the world facing new opportunities and challenges of geopolitical shifts, technological innovation, globalization and new business and consumer demands.
I invite you to visit the KPMG Private Enterprise tax website for further insights on navigating the growth of your business successfully.
