As the UK and US approach pivotal elections in 2024, corporate finance and tax departments are gearing up for potential economic and reputational impacts. The global tax landscape may see significant changes depending on the outcomes of these elections. In recent history, the UK’s decision to exit the European Union, known as Brexit, had far-reaching consequences on global tax policies. Many multinational financial firms had to execute contingency plans to move assets and headquarters out of London to other EU hubs, resulting in a drop in tax revenue for the UK.
The VAT system in the UK was directly linked to the EU’s common market structure, causing complications when the UK exited the EU. The reconfiguration of the VAT system to accommodate new customs duties and tariffs led to higher costs of imports and exports. American corporations also faced significant changes due to tax reforms, such as the Tax Cuts and Jobs Act (TCJA) introduced by President Donald Trump, which slashed corporate tax rates. President Joe Biden’s Inflation Reduction Act (IRA) reversed key corporate provisions of the TCJA, reinstating a corporate alternative minimum tax (CAMT) on companies with at least $1 billion in book income.
The uncertainty surrounding potential tax-focused volatility in the latter half of 2024 is leaving corporate decision-makers in a dilemma. Forecasting the potential changes that may come with different political candidates is challenging, as surprises are likely to arise. Companies will need to ensure key stakeholders are prepared to make agile decisions based on comprehensive data in real-time, even amidst uncertainty. Compliance with new requirements will also be crucial to avoid becoming a political target and facing reputational damage.
In times of high stakes and uncertainty, business leaders must focus on what they can control. Building a bulletproof tax story for corporate tax and financial professionals will require a focus on data integrity, regulatory compliance, and quick decision-making processes, even in the face of unknown changes. As the election season unfolds and potential tax reforms loom, corporations must be prepared to adapt to the evolving global tax landscape and navigate the challenges that come with it. By staying agile and proactive, businesses can mitigate risks and ensure their tax policies align with the changing regulatory environment.
