Tax services
Tax Compliance in a changing world
The tax landscape is constantly changing. Regulatory requirements are increasing, business and finance transformation is commonplace, and tax authorities and boards are demanding that tax risks are effectively managed. In this fast changing world, at PwC, we’re helping clients build a sustainable tax strategy for the future. Our complete approach to tax management brings together tax function design, technology and compliance delivery to help our clients understand and meet these challenges head-on.
It is important that the tax compliance process is truly robust, to prevent reputational damage and to give confidence to tax authorities and to internal and external stakeholders. Compliance is also an opportunity for companies to gather critical business insights. The right technology and processes can significantly reduce the tax compliance burden. Automating compliance tasks, as well as reducing the manual effort needed for data analysis, enable people to free up time to drive innovation and add value.
Built on many years of specialist compliance experience, we put business needs at the centre of our tax compliance and reporting services. We are helping our clients to prepare their tax function for the future and to adapt to the rapidly changing world. We assist companies who want to outsource their compliance and accounting functions. By combining our people’s expertise with the latest technology, we help companies become more efficient. We also provide governance solutions to give businesses confidence in their compliance and reporting processes.
Sustainable Tax Strategy
The global tax and regulatory landscape is changing fast, not only due to changes to enacted laws, but also due to changes to tax governance regulations, codes of conduct and numerous international tax transparency and anti-tax avoidance initiatives. With more stakeholders looking at businesses’ tax profile and behaviour and the fast digitalisation, it is important to have a fresh look at tax policy and tax risk management. Using business principles and strategy as a starting point to define a company’s tax management strategy is key in this environment.
Service providers and companies need to ask themselves to what extent their organisation is fit to deal with these developments. To what extent is a company’s tax management strategy aligned with latest international tax developments - such as the EU Anti-Tax-Avoidance Directives. Is the strategy implemented, monitored and tested accordingly? Is it aligned with the company’s business strategy and the value creation principle? All these questions need to be asked to attain a holistic and sustainable tax management and compliance approach.
Tax transparency is about taking a broader look at tax strategy, tax technology, risk management and the wider impact of tax and putting a greater focus on clarity.
The new norm: Responsible Tax Transparency
Tax has become a reputational consideration. External stakeholders such as the media, civil society organisations, government and the public at large are showing an interest in a company’s tax affairs including its strategy, and the amount of tax that it pays. External relations departments need to liaise with their tax departments to understand the key themes and messages around tax and to build these into their communication plans. Tax and its impact on corporate reputation is a key business issue.
Building public trust is a priority for advisors and companies aiming to increase their resilience in a turbulent world. Clear communication around tax is one way to help this. They need to be accurate, clear and relevant. They should explain a company’s approach to tax, the risks it faces and the controls in place to manage them. They should use plain language that non-experts can understand, with an ability to explain the reasons why a current tax charge is not simply the accounting profit at the statutory rate. They should look to show the bigger picture beyond traditional disclosures and perhaps go wider than tax.
Tax transparency is not about providing additional technical detail on numbers and performance. Rather it requires a broader look at tax strategy, risk management and the wider impact of tax, as well as a greater focus on clarity. Advisors and companies should adopt a proactive approach, considering transparency, towards whom you need to be transparent and for what purpose.
We work with clients to help improve their transparency around tax in a national context, and globally and to comply with the new mandatory disclosures, such as Country-by-Country reporting, DAC6 disclosure of certain cross border arrangements, FATCA and Common Reporting Standards.
Investing in our People and Technology: staying relevant in changing times
The pace of the change in tax is accelerating significantly and so too are our clients' needs. To succeed in this economy and remain relevant, we are focusing on empowering our biggest strength, our people, on what matters to them, while making sure that they are gaining the skills they need to adapt to this transforming environment. As our tax professionals progress in their career, they should strive to become “future-proof,” continuing to learn new skills in order to add value as business and technologies change.
Staying up-to-date with the required skills is a necessity in any profession and is an important aspect of the PwC professional development framework. Traditionally, strong technical skills have entailed a good understanding of technical tax topics, the tax code, regulations, and case law, plus the ability to research source material and perform complex income tax provision and tax return calculations. Technical tax knowledge and skills remain very important. However, increasingly, the evolving tax environment requires skills in areas that are not tax-technical. The skills needed in tax services are expanding from core tax technical skills to include others that are increasingly in demand:
Tax technical: A basic requirement of the tax function;
Business acumen and soft skills: Understanding the business, collaboration with other functions, building cross-functional relationships, engaging and motivating teams;
Industry expertise: The Luxembourg market is characterised by niche industries, such as Alternatives, Asset and Wealth Management, Financial Services. They require deep industry knowledge, that goes well beyond tax and accounting technical;
Problem solving and process improvement: Tax, finance and business transformation, solving PwC’s and our clients’ tax and tax function organisation challenges and effective change management;
Technology and data-analytics: New production, dashboard and visualisation tools, ERP sensitisation, Robotic Process Automation, other AI and machine learning, notably for our Tax Compliance, Accounting and Reporting Services;
Project management: Identify expected outcomes and benefits, apply effective project approach and methodology.
The changing nature of the work also requires new skills. We are investing in a new learning and development platform. Furthermore, we are revamping our training plan, focusing on four pillars: technical, soft, business and digital, to ensure that our people benefit from tailored development tools to acquire the right skills set for now and the future.
We are also changing the way we work, with greater flexibility and different working options – such as working from home and working at border offices - but also by promoting agility, allowing our people to have diversified work allocation.
Changing the sourcing of our Tax talent
Until now, university tax, legal, economics, finance and accounting graduate programmes have been the traditional source of new un-experienced hires into our Tax & Accounting Services profession. We are now working to expand the curriculum to include elements of technology and data analytics, business case studies/problem solving, and project management. However, it might sometimes be difficult for Tax and Accounting teams to find all required skill sets from traditional sources.
Therefore, increasingly, our goal is to start looking to complement our traditional source by alternate sources and disciplines for talent with the skills needed for Tax & Accounting now and into the future. We would like to add to our teams youngsters who primarily are trained in information technology and can apply those skills to a variety of tax process and data needs. Some candidates may have risk management, consulting, or project management skills to facilitate process improvement initiatives and implementation of solutions across the enterprise.
Supporting Luxembourg’s Tax Policy options analysis
Tax policy is an important consideration in protecting a country’s economic competitiveness. This is notably the case for smaller EU countries, like Luxembourg, that are dependent on the open, international economy as they have a smaller home market, industry and customer base. Luxembourg’s historic strong economic growth and healthy budgetary position have been the result of long-term and proactive government policy in all government dimensions.
There are recent international tax developments - for example the enactment of the EU Anti-Tax Avoidance Directives (e.g. ATAD I, ATAD II, DAC6) on the one hand and major tax reforms by other countries (e.g. the US, UK, Switzerland, Ireland, Netherlands) – that will impact Luxembourg’s economy and competitiveness in the near future. Luxembourg will be assessing its tax policy and tax reform options to address these developments and, at the same time, preserve its healthy economic and budgetary position.
In our view, to be effective, a tax policy reform should meet 5 critical objectives:
Define Long-Term Tax Policy strategy that is visionary and balanced:
that complies with the latest international taxation standards and effectively tackles tax-avoidance;
that is budget neutral and preserves Luxembourg’s budget surplus strategy;
that protects Luxembourg’s international economic competitiveness;
that considers the need for “level playing field” when introducing new anti-tax avoidance measures at global and EU level to ensure effectiveness of such measures.
To define Luxembourg’s future tax policy strategy broad consultation with key stakeholders is recommended. At PwC Luxembourg, we have expressed our full support to the government tax policy agenda by:
sharing our expertise, know-how and market insights (impact on economy, investments, tax revenues, insights into foreign country tax policy strategies), enabling policy makers and other key stakeholders to have real-time insights in these market and tax developments;
contributing to the centrally coordinated market intelligence initiatives, such as the initiative led by the Union des Entreprises Luxembourgeoises;
by performing in-depth studies, for example our past PwC “Future of Tax” study.
