11 December 2025 Global Tax Policy and Controversy Watch | December 2025 edition Tax controversy is at an inflection point. While tax controversy continues to increase in both volume and length of time to settle disputes, both businesses and tax authorities are rushing to embrace technology including generative artificial intelligence (GenAI) in the hopes of alleviating burdens. There may soon be no looking back. The 2025 Tax Risk and Controversy Survey captures insights from 1,934 senior tax and finance executives representing 48 jurisdictions and 12 industries. Key highlights include:
Today's change is nonlinear, accelerated, volatile and interconnected. It presents both a challenge and a catalyst for reinvention. The most successful businesses don't resist change; they harness it. Building continuous transformation into tax and finance functions can equip them to use AI, adding rich, deep insight and value to businesses. Explore the 2025 key findings now. EY Tax Partner Ting Ting Lim discusses emerging trends in corporate income tax audits, emphasizing the importance for businesses to strengthen compliance efforts. As enforcement measures become stricter, proactive preparation is essential for navigating this evolving landscape effectively. In today's complex regulatory landscape, effective tax governance has emerged as a strategic imperative for organizations worldwide. As the regulatory environment becomes increasingly intricate, aligning trust, risk and compliance is essential for sustainable success. The Leaders' Declaration, released at the conclusion of the 22-23 November 2025 G20 Leaders' Summit, references the G20 Leaders' continuing constructive engagement to address concerns regarding Pillar Two global minimum taxes, with the goal of finding a balanced, practical solution acceptable to all as soon as possible. Businesses should continue to monitor global tax discussions, evaluate the potential impact of international tax changes under discussion and consider engaging with policymakers on the practical implications of proposals as they are developed. On 4 November 2025, the Canadian Minister of Finance and National Revenue presented the 2025 federal budget for consideration by Parliament. The budget includes various tax measures for individuals and corporations, but no changes to corporate or personal income tax rates. Key measures include a significant restructure of Canada's transfer pricing rules, immediate expensing for eligible manufacturing and processing buildings, reinstatement of accelerated capital cost allowance for liquefied natural gas facilities, and enhancements to the Scientific Research and Experimental Development (SR&ED) tax incentives. The proposals will next be considered by Parliament in the form of Budget Implementation Bills, the first of which was tabled on 18 November 2025. On 26 November 2025, the UK Chancellor presented the 2025 Budget, which includes significant tax measures focused on employment and individual taxation, as well as detailed changes to corporation tax affecting cross-border transactions and reorganizations. There are no changes proposed to corporation tax rates or the incentive rates for research and development spending, but a reduction was announced to the writing down allowance main rate of capital allowance for corporation tax. Finance Bill 2025-26 will set out more of the legislative detail and is expected to be published shortly. On 19 November 2025, the Organisation for Economic Co-operation and Development (OECD) released an update to the Model Tax Convention on Income and on Capital and its Commentary. Key changes include clarifications on when cross-border remote working (such as from a home office) creates a taxable presence for a business, a new alternative provision on how income from activities connected with the exploitation and extraction of natural resources should be taxed and other updates aimed at ensuring consistency in treaty interpretation and enhancing tax certainty. On 31 October 2025, the Australian Taxation Office (ATO) released draft instructions for completing the public country-by-country reporting annual report, with the first reports due by 30 June 2026. The draft ATO instructions: provide step-by-step practical guidance for preparers; clarify how to complete each section and field in the report form, including where exemptions have been obtained; and address some common scenarios in determining disclosures. Entities must ensure they have the necessary systems in place to collect and report detailed information, including the allocation of tax liabilities among group members, to comply with the new reporting requirements. In October 2025, the Algerian General Directorate of Taxes issued two circulars effective from 1 January 2025, clarifying the rights and obligations of audited companies. One circular enhances information access for tax authorities, imposing fines for noncompliance, while the other allows taxpayers to request arbitration during audits, ensuring clarity and protection in the process. On 3 November 2025, the Kenya Revenue Authority issued draft regulations for the Advance Pricing Agreement (APA) framework, inviting public input. These regulations seek to enhance tax certainty and align with international best practices in transfer pricing disputes, providing clarity for taxpayers. The Israel Tax Authority's Circular 8/2025, issued on 2 November 2025, standardizes profit attribution for R&D centers and sets approval thresholds for transfer pricing changes. It introduces a ruling track for intellectual property transfers post-acquisition, ensuring seven years of pricing certainty and a clear valuation formula, aligning with OECD principles to enhance competitiveness for multinationals in Israel.
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