The firm’s survey of more than 900 tax and finance executives in 69 jurisdictions found that 59% of executives have experienced an increase in risk or uncertainty around tax legislation or regulation as a result of globalisation.

While tax risk has been weighted toward emerging markets in recent years, geopolitical drivers including the tax implications of Brexit and the uncertain direction of tax policy in the US, are shifting the epicentre of tax risk away from emerging jurisdictions toward developed economies that are traditionally characterised by a more measured approach to risk. China and India are also rising up the list.

Rob Hanson, EY global tax controversy leader, said: ‘Until recently, emerging markets have been far more unpredictable for global businesses from a tax perspective, with the introduction of new tax rules in regions such as Africa and Latin America.

‘Now, with seismic geopolitical change taking shape across the US, the UK and beyond, we are seeing a significant increase in tax risk and uncertainty and a move toward more imminent controversy in developed markets.’

Tax transparency

The impact of geopolitical change is further compounded by transparency and reporting requirements arising from the OECD’s base erosion and profit shifting (BEPS) project. Half (55%) of respondents say they have experienced an increase in tax disclosure and transparency measures, and 41% have seen an increase in the volume and/or intensity of tax audits.

Looking to the future, 55% of respondents state that they think global disclosure, reporting and transparency requirements will increase significantly, while just 3% believe they will remain the same, and 56% say they are concerned that governments will require public disclosure of tax information.

Hanson said: ‘Tax authorities are making strategic use of data analytics to facilitate compliance and audit determinations, and are increasingly sharing this data with tax authorities in other jurisdictions. This exposes businesses to more risk, however, if their people, processes and systems are outdated or misaligned with government requirements and expectations.’

The survey also confirms that tax risk is increasingly rising on the boardroom agenda and permeating business functions, with 41% stating that their CEO and/or board’s oversight of tax risk and controversy has increased over the past two years. Almost three quarters (73%) say they provide periodic briefings to the CEO or CFO on tax risk and/or controversy.

Hanson said: ‘In a landscape characterised by uncertainty and change, it is critical to have a clear and structured line-of-sight of flashpoints for controversy around the whole organization. ‘Now more than ever, the C-suite is beginning to understand that tax policy and risk is much more than just an issue for the tax function. Tax teams must take responsibility for helping the wider business understand and respond to all of the implications.’

EY’s report, Tax Steps in the Light, is here.