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BEPS debriefed: Reshaping financial reporting today, redefining tomorrow

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All market leaders and financial teams are subject to various regulatory standards. Despite this, regulation was cited as a top industry challenge by CFOs across all sectors. Most businesses have not been affected by BEPS Pillar One, yet the subsets of BEPS, namely Pillar Two and 2.0, are a different story. While strategic tax planning is already a complicated undertaking, it’s about to get even more complex for multinational companies facing upcoming changes to tax law under new Base Erosion and Profit Shifting guidelines, or BEPS for short.

BEPS 2.0 Pillar Two took effect in early 2024, imposing new data reporting requirements and additional global tax compliance rules for every multinational business with a turnover greater than 750 million euros. This legislation increases the pressure surrounding already over-stretched tax teams that will now have to collect more data from multiple sources and across departments. Companies that are currently doing business in multiple countries should already be preparing for the new complexities BEPS 2.0 Pillar Two will pose to the tax and reporting process. 

Decoding BEPS, the evolution of global tax compliance 

BEPS is a set of rules and standards established by the Organization for Economic Cooperation and Development and subsequently adopted by numerous countries around the world. The primary purpose of BEPS is to establish a minimum baseline for corporate taxation such that multinational businesses are no longer incentivized to shift profits from higher-tax countries to low-tax nations.

BEPS consists of two broadly defined provisions, which the designers refer to as “pillars.” Pillar One pertains to the allocation of business profits to various countries based on actual business activities in each of those nations. In essence, this rewrites the rules pertaining to nexus, opting instead to allocate profits based on the jurisdictions where a company’s goods or services are used or consumed. Initially, Pillar One will apply to companies with worldwide revenues of €20 billion or more. Over the next seven years, that threshold will be reduced such that businesses with €10 billion or more in revenue will also be included.

BEPS Pillar Two will affect a significant number of companies. Pillar Two is aimed at establishing an effective global minimum tax rate of 15%. Under BEPS Pillar Two, companies will first calculate taxes for each country in which they operate. If their effective tax rate for any of those jurisdictions falls below 15%, then they will be liable for paying that 15% minimum in those respective countries.

Fundamentally, BEPS is a set of nonbinding rules. Its creator, the OECD, has no statutory authority to set tax rates or regulations for the 139 member countries. However, BEPS is available as a common standard that nations may choose to adopt through legislation. The general framework of the rules has been agreed upon, but the formal adoption of the rules is still being negotiated and clarified. 

Although there may be some minor adjustments, business leaders still need to be cognizant of the effects BEPS 2.0 Pillar Two will have on organizations. 

Outlining its challenges — assessing the impact of BEPS

BEPS 2.0 Pillar Two is anticipated to make tax planning more complicated than ever before, with tighter deadlines and more stringent audits applying increased pressure on already strained tax professionals. As a result, many of these employees will likely struggle to work strategically if ill-prepared.

Research indicates that while 90% of respondents say BEPS 2.0 Pillar Two will have a moderate or significant impact on their business, just 30% have completed an impact analysis. As the new regulations start being implemented progressively around the globe, organizations must start preparing their teams. 

Tax leaders must move quickly to assess the potential impacts, advise senior executives and other stakeholders on the upcoming changes, and determine what needs to be done to comply with the new rules and manage their implications. 

Beyond being adequately prepared, BEPS 2.0 Pillar Two will introduce new complexities into the tax forecasting and reporting processes, potentially with powerful implications for corporate structuring and transfer pricing decisions. Specifically, challenges around consolidating, cleansing and analyzing tax data from across the organization will be magnified. 

For example, organizations relying on spreadsheets to support their tax forecasting and reporting processes may find the shifting landscape under these new regulations will create new challenges that may be difficult to manage, including the introduction of inconsistent data integrity that could lead to errors in tax reporting and forecasting. This can result in enormous financial and legal costs for organizations. 

It’s generally agreed that the plan will result in higher corporate taxes for most global companies, but the reality is that BEPS constitutes a radical shift in the way taxes are levied on multinational companies. For organizations to be successful with upcoming changes to BEPS, they need to understand how these soon-to-be-imposed data and reporting regulations will transform the industry.

What BEPS means for the future of financial reporting 

BEPS already requires companies to itemize their revenues by country, and as taxation bodies develop more sophisticated models that compare BEPS data with corporate tax return data, there may be an increase in investigations. This reinforces the growing need to ensure tax and accounting teams have a foundational understanding of the implications coming from BEPS changes.

To that point, BEPS represents a change in global taxation, but it isn’t the only change. Other elements of change include IFRS 16/17 and parallel modifications to lease accounting under U.S. GAAP, political uncertainty, a push toward higher tax rates and increased enforcement, and rising inflation in 2024. In response, organizations must remain vigilant in reviewing the latest legislation and analyzing recent changes within the business. As new rules are put into practice for BEPS, there is little doubt that fine-tuning the system will require some changes. This should include bringing operations together under one roof. To do this, automation will be crucial, especially to ease tax compliance, reduce data silos, and deliver better analytical insights. 

With that said, organizations should look for purpose-built tax planning and tax reporting solutions that can automate these processes by collecting and collating information from source accounting systems, modeling scenarios, and predicting the likely tax implications, as well as serving as a foundation for documentation and compliance transfer pricing decisions. Many companies may struggle to perform tax forecasting and reporting with manual processes, spreadsheets and a disjointed collection of tools. Fortunately, tax reporting technology can bring it all together under one central location to, effectively streamline and simplify processes while also managing operational transfer pricing, and improving accuracy. 

Finance and accounting leaders are often unable to see their group company’s effective tax rate until it’s too late for them to do anything about managing it. Under BEPS, that lack of visibility will become even more of a liability. Companies that want to clearly understand their options should put systems in place — as soon as possible — to reap the full benefits of smart corporate tax planning strategies. Collaboration and automation through the right tools will be critical to staying agile and successfully navigating the looming presence of BEPS 2.0 adoption. 

Ultimately, the next few years will be a pivotal time for finance and accounting departments at multinational companies. For tax professionals in particular, this is an opportunity to demonstrate the strategic value of tax accounting to others in the organization.

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IRS employee union requests emergency relief

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The National Treasury Employees Union, which represents workers at the Internal Revenue Service among 37 federal agencies and offices, has asked a federal judge for emergency relief to preserve the union rights of federal employees while NTEU’s legal challenge to President Trump’s executive order stripping unions of collective bargaining rights can be heard in court.

Trump signed an executive order last Thursday removing the requirements from employees at agencies including the Treasury Department that he deemed to have national security missions. On Monday, the NTEU filed a lawsuit to stop the move arguing that Trump’s rationale for protecting national security was just a way to end union protections for federal workers. The administration also wants to prevent the unions from collecting dues automatically withheld from employee paychecks.

NTEU’s request for a preliminary injunction was filed Friday with U.S. District Judge Paul Friedman.

 “NTEU seeks emergency relief to protect itself and the workers it represents from this unlawful attempt to eliminate collective bargaining for some two-thirds of the federal workforce,” the request stated.

The NTEU contended that the Trump administration’s executive order claims that allowing workers to join a union was a threat to national security were absurd.

“We all know this has nothing to do with national security and that the true goal here is to make it easier to fire federal employees across government,” said NTEU national president Doreen Greenwald in a statement Friday. “Just five days after declaring the administration would no longer honor our contract with Health and Human Services, thousands of brilliant civil servants who work tirelessly to improve public health were let go for spurious reasons and little recourse to fight back.”

The union pointed out that Congress declared 47 years ago that collective bargaining in the federal sector was in the public’s interest by giving employees a voice in the workplace and allowing labor and management to work together. It acknowledged there is a narrow exemption in the law for groups of employees whose work directly impacts national security, but argued that Trump’s executive order is blatant retaliation against federal sector unions and ignores the laws passed by Congress creating the agencies.

In agencies where a reduction-in-force has been announced, NTEU’s contracts provide time for employees to respond to a RIF notice and explore alternatives to mitigate the impact of the layoffs.

Earlier this week, after two court rulings in California and Maryland, the IRS’s acting commissioner, Melanie Krause, announced the IRS would be bringing back approximately 7,000 probationary employees who had been fired and then put on paid administrative leave.

A bipartisan bill has been introduced in Congress to preserve collective bargaining rights for federal employees. The Protect America’s Workforce Act (H.R. 2550), sponsored by Rep. Jared Golden, D-Maine, and Brian Fitzpatrick, R-Pennsylvania, would overturn Trump’s executive order stripping collective bargaining rights from hundreds of thousands of federal workers at multiple agencies.  Separately, eight House Republicans and every House and Senate Democrat have sent letters to the White House condemning the executive order.

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Estate planning for the Tax Cuts and Jobs Act expiration

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The political calculus involved with the details of estate planning next year and beyond may be distracting financial advisors and clients from a larger, simpler conversation, one expert says.

On the off chance that the federal estate-tax exemption levels of $13.99 million for individuals (and double for couples) revert to half those amounts when Tax Cuts and Jobs Act provisions expire in 2026, only 0.2% of households would face potential duties upon transfer of assets, according to Ben Rizzuto, a wealth strategist with Janus Henderson Investors‘ Specialist Consulting Group. He predicted that most financial advisors and high net worth clients, such as those he works with and others across the industry, will see no changes. 

With few other revenue-raising provisions available to President Donald Trump and Republican lawmakers, they’re not likely to shield all estates from payments to Uncle Sam — as much as they might like to play undertaker to the “Death of the Death Tax,” Rizzuto said, using the label for estate taxes adopted by critics favoring bills like the “Death Tax Repeal Act.” Lawmakers’ decisions on future exemptions from the taxes (and when they make those decisions) remain out of advisors’ control. Meanwhile, they must remind clients that estate planning is much more than having a will and avoiding taxes, Rizzuto said.

“For financial advisors and clients, I would expect for many of them not to have to worry about federal estate taxes next year,” he said in an interview. “Even though they may not have to worry about it, there are still a lot of good conversations to be had.”

READ MORE: Tax Cuts and Jobs Act expiration: A guide for financial advisors

The 1%

Trust tools that reduce the value of the assets that will transfer to spouses or other beneficiaries upon a client’s death, combined with the available statistics about the shrinking share of estates subject to taxes, could bring some peace of mind to clients. The 2017 tax law itself pushed down estate tax liability as a percentage of gross domestic product to a quarter of its 2001 level, according to an analysis by the “Budget Model” of the University of Pennsylvania’s Wharton School. Just two years after the law’s passage, the number of taxable estates had plummeted to 1,275 — or 1% of the number at the beginning of the century.

At the same time, advisors could raise any number of questions with clients about their estates that involve varying degrees of expertise and collaboration with outside professionals. And many surveys have found that clients are expecting them to do so. For example, at least 70% out of a group of 10,000 adults contacted in January by WeAreTalker (formerly OnePoll) on behalf of online legal information service Trust & Will said advisors should offer estate planning. In addition, 40% of the group said they would switch to an advisor who provided that service.

“We’re seeing a fundamental shift in client expectations,” Trust & Will CEO Cody Barbo said in a statement. “The findings are clear. Advisors who fail to integrate estate planning into their practice aren’t just missing an opportunity; they are facing a threat to their client base as wealth transfers to younger generations over the next two decades.”

READ MORE: Ethical wills can be a crucial tool for estate planning

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Get back to the planning basics

In that context, advisors and their clients should steer clear of trying to make sense of a complicated, ever-changing flow of news from Capitol Hill as Trump and the GOP pursue major tax legislation with a year-end deadline, Rizzuto said. If clients truly could be on the hook for estate taxes, a grantor retained annuity trust, a spousal lifetime access trust or gifting strategies may eliminate the possibility. One method involved with the latter could set them up in the future to receive stock that is “highly appreciated with lower basis,” Rizzuto noted, citing the example of equities that have gained a lot of value that a client could give to their parents.

“Why not gift them upstream?” Rizzuto said. “My father holds it. I tell him, ‘Dad, you have to do these things: Live for another 12 months, make sure you don’t sell, make sure that you update your will or your instructions to gift it back to me when you die.’ That’s another idea that we’ve been talking about with advisors.”

From another perspective, these possible paths forward may beckon to clients this year, if they are tuning into Beltway news about the progress of the tax legislation, he said. To bypass the risk of client perceptions that their advisor isn’t doing any tax planning at all, Washington’s complex maneuvering around the future rules is, “if nothing else,” a “great opportunity for advisors to bring this up at a very high level,” Rizzuto said.

“Advisors will really need to go back to basics and have some foundational conversations with clients,” he said, suggesting their goals with taxes as one key point of discussion. “‘What is it that we actually control within your financial and tax plan?’ When it comes right down to it, it’s really just incomes and deductions.”

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Developing future leaders in accounting: the new imperative in an AI and automation driven era

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As technology continues to automate routine tasks, the role of finance professionals is evolving, demanding deeper capabilities in critical thinking, communication and business acumen. 

Many of PrimeGlobal’s North American firms are focused on cultivating these skills in their future leaders. Carla McCall, managing partner at AAFCPAs, Randy Nail, CEO of HoganTaylor, and Grassi managing partner Louis Grassi shared their views with PrimeGlobal CEO Steve Heathcote on the need for future leaders to balance technological proficiency with human-centered skills to thrive.

AI is transforming the sector by streamlining workflows, automating data analysis and reducing manual processes. However, rather than replacing accountants, AI is reshaping their roles, enabling them to focus on higher-value tasks. In the words of Louis Grassi, AI can be seen as a strategic partner, freeing accountants from routine tasks, enabling deeper engagement with clients, more thoughtful analysis, and ultimately better decision-making. 

Nail emphasized the importance of embracing AI, warning that those who fail to adapt risk being replaced by professionals who leverage the technology more effectively. HoganTaylor’s “innovation sprint” generated over 100 ideas for AI integration, underscoring why a proactive approach to adopting new technologies is so necessary and valuable.

McCall advocates for an educational shift that equips professionals with the skills to interpret AI-generated insights. She stressed that accounting curricula of the future must evolve to incorporate advanced technology training, ensuring future accountants are well-versed in AI tools and data analytics. Moreover, simulation-based learning is becoming increasingly crucial as traditional methods of education become obsolete in the face of automation.

Talent development and leadership growth

As AI reshapes the profession, firms must rethink how they develop and nurture their future leaders. To attract and retain top talent, firms need to prioritize personalized development plans that align with individual career goals. 

HoganTaylor’s approach to talent development integrates technical expertise with leadership and communication training. These initiatives ensure professionals are not only proficient in accounting principles but also equipped to lead teams and navigate complex client interactions.

Nail underscored the growing importance of writing and presentation skills, as AI will handle routine tasks, leaving professionals to focus on higher-level analytical and decision-making responsibilities.

Soft skills are the success skills

While technical proficiency remains vital, future leaders must also cultivate critical thinking, communication and adaptability — skills McCall refers to as the “success skills.” McCall highlights the necessity of business acumen and analytical communication, essential for interpreting data, advising clients and making strategic decisions. 

Recognizing teamwork and collaboration remain crucial in the hybrid work environment, McCall explained in detail how AAFCPA fosters collaboration through structured remote engagement strategies such as “intentional office time,” alcove sessions and stand-up meetings. Similarly, HoganTaylor supports remote teams by offering training for career advisors to ensure effective mentorship and engagement in a dispersed workforce.

McCall emphasized why global experience can be valuable in leadership development. Exposure to diverse markets and accounting practices enhances professionals’ adaptability and broadens their perspectives, preparing them for leadership roles in an increasingly interconnected world.

Grassi reminded us that an often-overlooked leadership skill is curiosity. In his view the most effective leaders of tomorrow will be inherently curious — not just about emerging technologies but about clients, market shifts and global trends. Encouraging curiosity and continuous learning within our firms will distinguish the true industry leaders from those simply reacting to change.

A balanced future

What’s clear from speaking to our leaders is PrimeGlobal’s role in fostering trust, community and knowledge sharing. McCall recommended member-driven panels to discuss AI implementation and automation strategies and share best practice. Nail, on the other hand, valued PrimeGlobal’s focus on addressing critical industry issues and encouraged continuous evolution to meet professionals’ changing needs.

The future of leadership in the accountancy profession hinges on a balanced approach, leveraging AI to enhance efficiency while cultivating essential human skills that technology cannot replicate, which Grassi highlights skills including leadership and building client trust.

As McCall and Nail advocate, the next generation of accountants must be agile thinkers, skilled communicators and strategic decision-makers. Firms that invest in these competencies will not only stay competitive but will also shape the future of the industry by developing well-rounded leaders prepared for the challenges ahead.

By investing in both AI capabilities and essential human skills, firms can not only future proof their leadership but also shape a resilient and forward-thinking profession ready to meet the challenges of the future.

As Grassi concluded, while technical skills provide the foundation, leadership in accounting increasingly demands emotional intelligence, empathy and adaptability. AI will change how we perform our work, but human connection, trust and nuanced judgment are irreplaceable. Investing in these human-centric skills today is critical for firms aiming to build resilient leaders of tomorrow. To remain relevant and thrive, professionals must prioritize developing strong success skills that will define the leaders of tomorrow.

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