Tax governance in the world of Industry 4.0

Industry 4.0 is changing the speed investment decisions are made. That means tax regulators and business leaders must understand how to develop and implement regulations and strategic growth plans while working with governments to create global solutions.

The Fourth Industrial Revolution brings with it profound change, and our international tax system is simply no longer fit for an age where predictive maintenance, artificial intelligence (AI), and smart factories rule the day. 

This study examines different Industry 4.0 scenarios that reflect the magnitude of the challenges ahead, and the unique challenges each brings for both business executives and policymakers. We found that despite these unique situations, certain policy questions remain consistent across all. They are:

• Direct tax. As supply networks become less centralized, it will be vital to consider where value is generated in a supply chain, how or where the value should be taxed, and which entity should be liable for the tax.
• Indirect tax. Organizations must consider whether new establishments will be created globally, the nature of what is being supplied, and what this means for their global value-added tax (VAT) compliance.
• Employment tax. As workers find new roles and new ways of working in an Industry 4.0 ecosystem, tax considerations will vary by use case.