Post-pandemic Asia Pacific: Taxation fast lanes and speed bumps
Economic projections in Asia Pacific show that recovery is to be expected in much of the region. However, sustainable recovery will take much longer to achieve. The effects of the pandemic, spiraling inflation and global commodity prices, rapidly rising interest rates, global supply chain vulnerabilities and geopolitical and trade tensions have contributed to an increasingly volatile postpandemic global market.
In the latest outlook of the Asian Development Bank, the growth forecast for the region in 2023 has been downgraded to 4.9% from 5.3% with inflation further raised to 4% from its earlier projection of 3.5%.
On the back of an uncertain economic backdrop, an evolving digital economy and the growing climate crisis, governments and businesses face interrelated challenges. Tax regulators in the region look to rebuild their tax and fiscal policies to maximise revenue generation, boost public finances and in some cases, repay loans from international organisations. Tax executives, meanwhile, are at the receiving end of stricter tax audits, compliance and other complex unilateral tax policies.
Despite being at the opposing ends of the tax spectrum, governments and businesses in the region need to strike a balance, for one without the other cannot result in a sustainable recovery. Here are the key themes at play in helping shape how soon economies and businesses can fully bounce back:
→ Tax reliefs and subsidies for businesses have been part of a number of governments’ recovery plan in the region to help spur economic activities. This is complemented with stricter tax audits and tax compliance requirements.
→ Finetuning tax laws in preparation for alignment with Pillar One and Pillar Two in a number of OECD member countries in Asia Pacific. Any delay in the implementation of the two-pillar solution is likely to lead to a proliferation of unilateral tax measures, causing greater complexity to businesses operating internationally.
→ A number of jurisdictions focus on developing their markets as hub for particular sectors and industries.
→ Some jurisdictions enhance policies to boost skilled immigration and tourism while others impose higher taxes on high-income earners.
→ Many jurisdictions open up to the digital economy by moving many tax services online and enabling e-invoicing, while moving to tax cross-border digital services and tightening their grip on cryptocurrencies.
→ Green taxes and the phased implementation of sector-specific carbon taxes and disclosure requirements are beginning in some jurisdictions. These are expected to grow, although unevenly, as the true cost of energy externalities begins to be reflected, while policy-makers still seek to preserve local competitiveness.
Tax executives in need of long-term and conflict-free advisors who can cover multiple jurisdictions in developing collaborative approaches and responses in line with complex audit and compliance requirements of tax authorities can turn to WTS Global experts in Asia Pacific. We have the expertise and experience to provide global businesses with insights and advice to navigate an increasingly complex and changing tax and trade landscape in the region. We look forward to discussing our insights on the trends and outlook highlighted in our Asia Pacific brochure.
For the details on the latest Asia Pacific brochure, please see: WTS Asia Pacific Brochure