What was the most significant development in your region/jurisdiction's tax practice in the past 18 months?
Across the entire NSE & ME practice, we've seen two major changes – around both technology/digitisation and a related change in the impact of that on the legal market.
The increase in technology enabled and digital tax offerings is the result of responding to legislative change and to reflect the changing needs of clients in the light of COVID-19. The most significant in our internal practice has been in the growth of Deloitte Legal (which sits within our Tax & Legal practice), and in particular the decision to grow Deloitte Legal in the UK.
Deloitte Legal combines market-leading lawyers, consultants and technology specialists to provide clients with new solutions to legal problems, for example by providing assistance in harnessing the considerable benefits created by advances in legal technology.
What was the most notable effect of that change?
With the growth of Deloitte Legal in the UK, we now have the capability to help clients transform how they access legal advice and implement regulatory changes as a result. As a result, we can now offer both traditional legal support but also new end-to-end solutions that incorporate both our legal advice and the ability to implement any required transformation within the organisation.
Where is the market moving in this practice area?
Multinational groups are currently operating in a period of unprecedented change. Today's international tax teams need access to practical solutions to manage this change encompassing technology and best practice, while balancing against available resources. Tax teams are having to juggle implications of international tax reforms, Brexit, increased regulations and reporting requirements alongside international growth agendas while keeping on top of their compliance obligations.
Similarly, in the legal market, there is a constant drive for organisations and their in-house legal teams to do 'more for less' and clients face the dual complexities of a heightened regulatory environment and an increasingly globalised business landscape. This means that General Counsels and other buyers of legal services must consider more cost-effective ways of accessing support other than the traditional way of instructing external lawyers who charge by the hour but also consider how a broader set of skills can be helpful to plan for and respond to regulatory change. We feel this is better achieved through multi-disciplinary practices like Deloitte than traditional law firms.
What kind of impact will this have on your work?
The rise of technology and the broader digitisation of tax has afforded our tax practice significant opportunities. It has also presented some challenges, such as thinking differently about our current and future talent pool, and the shape, size and model of our own business. This will also be a challenge for clients. Automating a number of 'traditional' tax or legal services which thereby reduces costs/offers savings to organisations means we have to think differently about value articulation, pricing transparency and how our tax practice needs to adapt to remain relevant and profitable. The market impact here is most significant around legal services where technology had been under-deployed generally.
Do you anticipate any significant legislative changes in the future with a material impact on tax in your region?
As a result of the COVID-19 crisis, there is a strong likelihood that we will see a significant increase in taxes across the region. Governments have been supporting their economies but at some stage someone will need to pick up the bill. We will continue to see an environment where states spend more on health and social care, amidst an increased burden of public debt as a result of the crisis. Whilst it is difficult to predict precisely how the tax burden may increase, systems will need to adjust to cope as a result and we expect to see significant legislative change. Already we see a part of our region–the Middle East–where the largest economy has significantly increased consumption taxes.
If these come into force, how will the industry look in the future?
With increased digitalisation of national revenue systems, which will become more sophisticated, clients will need more support to address how these changes are accommodated and administered. Digitisation will be critical in helping us and our clients respond to these increased demands.
How would you describe the tax controversy landscape in your region/jurisdiction?
For the most part, across our region it remains quite complex. In territories where there are developed regulatory bodies, we're seeing an increase in tax disputes. The impact of this means clients need specialist support to help them through these challenges. This is a highly complex, high risk but high value area of work for advisers and we have a market leading suite of services designed to support clients at all stages of the controversy lifecycle from pre-dispute through to litigation.
Do you expect tax procedures in your region to move towards common standards or diverge in the future?
As a result of the work being undertaken by OECD, around Pillar 1 and 2, we do expect more common standards being introduced across the region. However, the COVID-19 crisis is also likely to see countries taking a national approach, implementing specific domestic measures in order to offset the debt arising from the pandemic.
Is the global drive towards regulation going to affect tax practice? If yes, in which areas?
Tax authorities, the OECD and others are all driving towards increased real time reporting, transparency and disclosure resulting in more companies needing to be transparent about their tax affairs. Whilst the business community and general public at large are likely to have greater visibility of organisations' tax affairs, this does not necessarily translate to an increase in understanding or appreciation of the role tax plays within an organisation and its contribution to society. This will likely mean that more challenge is placed on businesses to explain their tax affairs to tax authorities and stakeholders more generally and they will need support in doing that.
What do you see as direct impact of COVID-19 in your practice?
We are seeing a shift of activity to those projects which can conserve or yield cash for the business. We are also seeing some acceleration of compliance work to make sure companies satisfy their compliance obligations despite the resourcing challenges at present. Legal services, employment law, distressed transactions/restructuring, refinancing/cash flow/liquidity are areas in which we're seeing an uptick. Industries are being impacted, with both negative and positive effects on sectors within. More so now than ever we recognise the need to stay close to our clients, to help them navigate the respond, recover and thrive stages. We've innovated and are developing ways to engage and interact with clients through virtual workshops and Greenhouse Lab propositions, as well as thinking differently to how we share content with our clients and the external market. Traditional face-to-face large-scale conferences are being replaced with smaller, community based, targeted virtual round table discussions, using a range of different technologies to ensure the best client experience.
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