The global economic landscape of March 2025 is reflecting volatility, marked by escalating trade tensions, regulatory shifts, and geopolitical uncertainties. In this "geo-economic storm," tax departments face unprecedented challenges that demand a proactive and adaptable approach. 

Rather than being reactive to each new development, the key lies in mastering the art of scenario planning. By anticipating potential futures, tax departments can equip themselves to navigate the complexities of this evolving landscape with agility and foresight.

This article is written by Juan Dosal ([email protected]) and Kseniia Shakhnazarova ([email protected]). Juan and Kseniia are part of RSM Netherlands Belastingadviseurs, with a focus on International Tax.

The core of effective scenario planning lies in recognizing that the future is not a single, predictable path. Instead, it’s a range of possibilities shaped by a multitude of interconnected factors. In this context, tax departments must move beyond traditional forecasting and embrace a more dynamic approach that considers a spectrum of potential outcomes. Imagine, for example, the impact of a sudden shift in trade policies. Rather than being caught off guard, tax departments can develop scenarios that model the potential effects of various policy changes on their operations. This involves not just analyzing historical data but also considering the potential motivations and actions of key stakeholders.

One of the most critical areas for scenario planning is the impact of trade conflicts and tariffs. Tax departments must develop models that simulate the effects of varying tariff rates on their supply chains, transfer pricing, and overall profitability. This requires a deep understanding of their value chains and the ability to identify potential vulnerabilities. By creating scenarios that explore different tariff scenarios, tax departments can develop contingency plans that minimize disruptions and optimize their tax strategies. For instance, a scenario might explore the impact of a sudden increase in tariffs on goods from a specific region, prompting the department to consider alternative sourcing strategies or adjustments to their transfer pricing policies.

Similarly, the increasing complexity of global tax regulations necessitates robust scenario planning. 

Regulations like the EU's Carbon Border Adjustment Mechanism (CBAM) and the OECD's Pillar Two global minimum tax introduce new layers of complexity that require careful analysis. Tax departments must develop scenarios that explore the potential impact of these regulations on their compliance obligations and tax liabilities. This involves not only understanding the technical details of the regulations but also considering how they might interact with existing domestic policies and other international agreements. By anticipating potential regulatory changes, tax departments can proactively adjust their compliance strategies and minimize the risk of non-compliance.

The fragility of global supply chains adds another layer of complexity to scenario planning. Tax departments must develop scenarios that explore the potential impact of supply chain disruptions on their operations. This involves considering a range of potential events, such as natural disasters, political instability, and supplier bankruptcies. By anticipating these risks, tax departments can develop contingency plans that ensure business continuity and minimize financial losses. For example, a scenario might explore the impact of a sudden port closure on the delivery of critical components, prompting the department to consider alternative logistics strategies or inventory management policies.

To effectively execute scenario planning, tax departments must embrace a collaborative and cross-functional approach. This involves working closely with other departments, such as finance, supply chain management, and legal, to gather insights and develop comprehensive scenarios. By fostering a culture of collaboration and open communication, tax departments can ensure that all relevant perspectives are considered and that contingency plans are aligned with the overall business strategy.

Forward Thinking 

While scenario planning is the core strategy, technology plays a crucial role in enabling its execution. Data analytics tools, modeling software, and collaboration platforms can help tax departments gather and analyze data, develop simulations, and communicate their findings. By leveraging these technologies, tax departments can enhance the accuracy and efficiency of their scenario planning efforts.

RSM is a thought leader in the field of international taxation consulting. We provide frequent insights through training and thought leadership, leveraging our deep knowledge of industry developments and practical experience working with clients. If you would like to know more, please contact one of our consultants.