As featured on BusinessMirror: The Future of Tax
In the world today, and especially when it comes to tax, the blistering pace of change and extreme, unprecedented events make it seem impossible to predict what’s around the next corner. But in some respects, we can glimpse how global forces at work today — from the pandemic and inflation to the energy crisis and war — might be molding the tax landscape of tomorrow.
What will taxation look like in 2030? We asked 17 of the tax world’s most inspirational and imaginative leaders for their unique views of what to expect in 2030 — and how we may reach that point.
Predictions for 2030
The tax landscape is changing at a faster pace than ever before — but what does that transformation mean for the future? To consider the potential answers to that question, KPMG asked tax leaders, policymakers and tax authorities from around the world to give us their views of what tax may look like in 2030.
Their predictions on tax span five areas where they — and KPMG — expect change could be most profound:
The 2030 citizen
Citizens of 2030 are much more aware of the importance of tax than people of earlier eras. The tax transparency movement that began in the 2010s fed a growing appetite for tax fairness and transparency. Then pandemic-related emergency spending and the ensuing financial toll in the 2020s highlighted the importance of governments’ fiscal responsibility and prudence.
Citizens find it much easier to deal with their taxes than it used to be. Advances in artificial intelligence and data analytics are allowing tax authorities' systems to prepare the most straightforward income tax returns automatically, with taxpayers simply obliged to review and approve them. Many governments have streamlined their tax, benefit and other services within a single organization. This means the citizens of 2030 have a one-stop shop to access all tax compliance and social welfare programs.
The Philippines, like many other countries, faced fiscal pressures and the need for responsible financial management due to pandemic-related emergency spending and financial challenges. As a result, the government implemented recovery measures that led to greater tax transparency, improved technological advancements and more streamlined government services.
The integration of modern technology into the Philippine tax system has significantly enhanced efficiency and improved the overall taxpayer experience. This includes the implementation of online tax filing and payment systems, an electronic invoicing and receipting system, data analytics for risk assessment, online taxpayer identification verification, enhanced taxpayer services through digital platforms and automation of tax assessments and refunds.
These technology-driven initiatives aim to simplify tax compliance, increase transparency, reduce administrative burdens and improve revenue collection – ultimately benefiting individuals and businesses by creating a more efficient and user-friendly tax environment.
Maria Carmela Peralta
Head of Tax
KPMG in the Philippines
Globalization and geopolitics
While there are forces at work leading to fragmentation in areas like trade, supply chains and energy security, globalization remains a success as far as international tax co-operation is concerned.
In the 2020s, a number of forces converged to move geopolitics from adversarial ‘wars of maneuver’ to ‘wars of position’ to win power by gaining influence. Success in the new arena requires the parties involved to be more transparent, collaborative and open to a diversity of ideas.
This innovative approach was key to the Organization for Economic Cooperation and Development (OECD)'s ability to forge breakthroughs in tax cooperation among over 135 countries. From the automatic exchange of information to the multilateral instrument, common approach and, most importantly, the agreement on global tax regulation via Pillars One and Two, the OECD was able to get all parties to agree on minimum standards that each party must meet while giving them room to tailor the rules for their own jurisdiction's needs.
Data and transparency
Tax audits have been changed by technology as well. Today’s tax authorities have gotten very good at risk-assessing taxpayers by analyzing the reams of data they gain from sources like automated tax filings, country-by-country reports and benchmarking information. They apply analytics to target their attention and develop specific issues. Instead of a flurry of queries, tax auditors are more likely to ask focused questions on potential problems that they have detected in the data.
These new capabilities are vastly increasing the powers of tax authorities to enforce compliance and raise collections. Good governance is needed to ensure they use these powers as intended. Tax administration processes need to strike the right balance between collecting the right amount of tax under the law versus a target of tax that the government wants to collect to finance its agenda.
The past decade saw rapid development among the emerging economies in Southeast Asia and sub-Saharan Africa. The telecommunications sector has been central to this transformation, with service providers and their supply chains innovating new technologies to increase communication, provide better access to resources, and deliver new services.
Now that a reliable internet connection is considered essential, luxury taxes and other tax deterrents have largely disappeared, making mobile technology much cheaper for lower-income citizens to buy and use. In turn, these citizens now have more open access to education, training and job opportunities.
Building a sustainable world
In 2030, environmental, social and governance (ESG) concerns have moved from the fringes to the center of corporate cultures and strategies, especially when it comes to tax. Virtually every company has a clear ESG policy in place, and many boards communicate them broadly, including their frameworks for tax strategy and governance.
For large strategic investors, ESG policies are now especially important. Industry leaders recognize that the performance of real estate assets is tied to how well asset managers navigate ESG challenges. Now ESG and return on investment considerations are aligned to the point where following an ESG program usually leads to better returns.
Now that a global corporate minimum income tax is in place, tax competition no longer exists to drive businesses to seek the lowest possible rate. This has eliminated the tension for asset managers between the need to manage ESG risks and the desire to maximize investment returns. Instead, tax planning has evolved toward accessing tax and non-tax incentives offered by governments to encourage green investments and innovation.
The excerpt was taken from the KPMG Thought Leadership publication: https://kpmg.com/xx/en/home/insights/2023/03/tax-voices-on-2030.html#/
© 2023 R.G. Manabat & Co., a Philippine partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity. The views and opinions expressed herein are those of the author and do not necessarily represent KPMG International or KPMG in the Philippines.