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Life after Lockdown: the view from Global Tax Solutions on the implications for businesses

Aug 27, 2020

First and foremost a human tragedy, COVID-19 is also having a growing impact on the global economy

As we come out of lockdown, business leaders are faced with issues as diverse as ensuring the safety of employees and customers, shoring-up cash and liquidity, repositioning operations and navigating complicated government support programmes. Global leaders need to look beyond conventional taxation to restart their economies, explains Jim Alajbegu, Firm Leader – International Tax for Baker Tilly in the US.

“Opportunities will emerge to access cash more efficiently by looking at current structures collaboratively and working as a team to see how we could, for instance, restructure current debt arrangements" – Jim Alajbegu

"However, we are seeing that global leaders are not necessarily in agreement on how to implement new ways of taxation", says Alajbegu.

"Take digital services tax as an example. Although the OECD is forging ahead right now with its plan on digital taxation, there is much disagreement around how to implement it, transfer pricing issues, the formulaic approach to allocating income. So much so, that the US recently withdrew from the global digital tax talks. So, there is a lot of uncertainty.

"What is likely is potential trade wars, higher tariffs and continued disruption to supply chains. And these uncertainties, I believe, are the biggest challenge that clients are facing."


Uncertainty remains

For most of Europe, lockdown measures are easing, business is slowing picking up, and the impact on personal lives is lessening. But clients continue to face uncertainty, explains Gijs Fibbe, Tax Partner in the Netherlands.

"The big client challenge is how to guide businesses through the uncertainties and how to assist them with scenario planning to prepare for this new normal, alongside the provision of more traditional accounting services" – Gijs Fibbe

"In Europe, the threat of a second lockdown after summer is very real. And the longer-term impact on the global economy and the knock-on effect that will have on clients’ business remain unclear."

Revenue authorities worldwide are also now under pressure to start filling the deficits that have been incurred in the stimulus measures implemented to support businesses during the pandemic.

"Many businesses will feel the pressure when revenue authorities start to increase their audit activity and become more aggressive on pursuing tax debts and tax disputes", explains Theo Sakell, Executive Director in Australia.

"Many will need to look closely at their structures to see how they can unlock better access to credit and improve cash flow.

"Clearly, a lot of businesses have had those challenges during the lockdown phase and have been, in many cases, 'hibernating'. Their efforts to get out of that phase will undoubtedly require further cashflow.

"Many will do deals with credit providers that might involve some 'haircuts' and, therefore, some debt forgiveness. A focus will be on preservation of any tax losses that have been incurred through COVID-19 so that they can be utilised once profits pick up with the objective of managing tax liabilities going forward."

Client challenges on the horizon

A key challenge for clients in the next phase of this pandemic is the desire to access the continuum of government stimulus measures", explains Sakell.

"These can be complex and difficult to access."

Being current on developments is critical to supporting clients in scenario planning and planning for the 'new normal'.

"We have collated data on COVID-19 tax measures in over 100 countries", says Fibbe.

"We know precisely what the COVID-19 tax facilities are in countries, not only in terms of minimising taxable income and claiming refunds, but also in reducing and postponing tax payments. And that means we can work with clients on scenario planning that allows them to get a grip on their liquidity position and also minimise risk."

"What's also important is the ability to provide consistent time sensitive advisory and compliance services around multiple jurisdictions", explains Alajbegu.

"It ensures that regulatory requirements are being met, central control processes are in place and awareness of key issues at the management level are being heard. And that is critical.

"Transfer pricing will also likely remain top of the C-suite's agenda as the focus for multinational clients will remain firmly on allocation of profits."

What is clear is that scenario planning and preparing for the short - and longer-term will be critical post COVID-19.

Listen to the full podcast: Great Conversations: Life after lockdown, the view from Global Tax Solutions on the implications for businesses.

Meet the experts


Jim AlajbeguTheo SakellGijs Fibbe


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