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The past 18 months have presented corporations with unprecedented challenges in the midst of a storm of global turbulence. The economic and social instability that began in the spring of 2020 has added dozens of additional variables to a traditionally difficult task of company forecasting and impairment. And today, as the world prepares to take its first steps beyond COVID-19’s shadow, the future promises only one thing: uncertainty. Forecasting has always been seen by multinationals as a mix of art and science, and this has never been more true than in the COVID age. With sections of the global economy booming while others struggle, supply chain disruptions generating enormous production problems all over the world, and the global tax reform landscape in high gear, it’s become nearly impossible for corporate tax teams to accurately forecast the future this year.

JUNE 16TH, WASHINGTON, DC: The quest of a global… [+] minimum tax by US President Joe Biden and his administration is just one x-factor multinationals must consider (photo by Samuel Corum/Getty Images).
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This is because even emerging positive economic signs are not without their own set of problems. As the major economies of the United States and Europe begin to return to pre-pandemic levels of mobility and economic activity, parts of Asia and South America continue to be plagued by the virus. Even if the economy in the United States is improving, it is a K-shaped recovery in which employment rates for the poorest third of wage earners remain consistently low, while employment rates for the highest-paid sectors of the population have already recovered.
Furthermore, the business tax environment is poised to turn into a minefield. As I previously stated, recent proposals for a worldwide minimum corporate tax by both the United States and the European Union have resulted in a surge of movement toward a cross-border revenue solution.
While the G-7 has agreed to support new rules for a global minimum tax rate on corporate profits and a new way of sharing revenue from taxing the world’s largest and most profitable companies, the EU is working on its own framework to create a single corporate tax standard and reallocate profits among its 27 member countries, all while the OECD prepares to lay out its guidelines for taxing in the developing world. Meanwhile, some countries, such as Ireland, appear to be skeptics of the entire proposal, with no intentions to lower their 12.5 percent rate.
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So, how can global corporations navigate this bewildering tangle of ongoing economic change and regulatory reform? By designing contingencies for as many alternative paths forward. As a result, many businesses have resorted to stress-testing a variety of scenarios in order to determine the most likely course of action.
Multinationals have relied significantly on their tax and finance departments to stabilize operations since the beginning of the pandemic. This tendency has persisted, with these groups becoming more important in real-time modeling and business structuring. These increased operations necessitate the ability to release capacity in order to meet both present compliance requirements and the tax function’s forward-looking strategic demands. To propose and argue business model modifications and supply chain restructuring, as well as simulate desired results in response to global economic recovery scenarios, tax leaders have become critical strategic advisors.
That is a difficult task. Even the most experienced CFO or corporate tax team can’t guarantee success 100 percent of the time. Unexpected events can and will occur, which will almost certainly result in errors. However, as we’ve seen over the last 18 months, organizations that can act swiftly and with agility will avoid craters and eventually negotiate this stormy landscape.
Optimism for 2022 is at an all-time high, which will inevitably lead to complacency. There will be a temptation to return to pre-2020 projections and expectations as the globe begins to leave the pandemic in the rearview mirror. With so much change on the horizon, any corporation tax plan must prioritize vigilance and flexibility.
This will be the common thread that runs across all those that achieve in the next 24 months. Multinational corporations that are at ease with uncertainty and recognize that all that is known is the unknown will be able to weather the storm. Those who are unable or unwilling to make these modifications face the risk of being swept away in its wake./nRead More

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