Strategies for Achieving Tax Certainty: Prevention is Better than Cure

In the world of taxation, the age-old adage “prevention is better than cure” holds true. Tax authorities around the globe offer various programs aimed at helping taxpayers achieve higher levels of tax certainty, reducing the likelihood of audits and disputes.

Pre-filing programs such as securing tax rulings or Advance Pricing Agreements (APAs) are popular among companies looking to avoid potential tax issues. However, a significant number of businesses still do not have a proactive, cooperative compliance strategy in place, leaving them vulnerable to audits.

Despite best efforts to prevent disputes, tax disagreements can still arise. In such cases, having a well-documented and proactive approach can help businesses navigate through audits and disputes more effectively. Understanding tax authorities’ concerns, maintaining proper documentation, and being aware of local audit processes are key strategies for increasing tax certainty.

When disputes do occur, dispute resolution programs like the Mutual Agreement Procedure (MAP) can help resolve cross-border double taxation issues. However, many businesses are not fully aware of the benefits of MAP and may not have a defined tax litigation strategy in place.

Looking ahead, with the implementation of new tax regulations like Pillar Two and public Country-by-Country Reporting (CbCR), achieving higher levels of tax certainty will be crucial for businesses. Centralizing controversy processes, localizing policies, and enhancing tax governance frameworks can help businesses navigate through the uncertainties of the tax landscape.

In an uncertain world, securing any degree of tax certainty is not only safer but also smarter and more strategic. By proactively managing tax risks and leveraging data capabilities, businesses can contribute more value to their overall objectives and turn tax challenges into opportunities for growth and success.