EY warns of business risks from fragmented tax rules
In Cyprus, consulting company EY said that international tax cooperation is becoming increasingly fragmented, leaving businesses facing greater uncertainty. Negotiations at the Organisation for Economic Co-operation and Development (OECD) and the UN are proceeding along different paths, while governments are introducing regional and unilateral measures, Cyprus Mail reports.
The assessment was published in EY’s 2026 Tax Policy and Controversy Outlook. According to the company, a single consensus-based process for developing international tax rules is giving way to several forums with parallel initiatives and different timelines. Tax policy is also becoming increasingly closely linked to trade, tariffs and industrial strategy.
OECD and UN negotiations
The OECD Inclusive Framework retains a key role in issues of international mobility and transfer pricing, but a significant part of its work is focused on administering and reviewing rules. In particular, this concerns the implementation of the Pillar Two global minimum tax.
Negotiations on Pillar One remain without noticeable progress. EY assesses that one of the priorities of the discussions is slowing or containing the spread of digital services taxes, rather than creating a multilateral system for reallocating taxing rights.
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At the same time, the UN is developing a Framework Convention on International Tax Cooperation, with the results of this process expected at the end of 2027. Unlike the OECD approach, decision-making at the UN does not require consensus: substantive issues can be decided by a majority vote, while protocols in particular require a two-thirds majority. EY noted that this could make it easier to adopt decisions without the support of all the largest economies.
Taxes, trade and artificial intelligence
EY also pointed to the strengthening link between tax, trade and industrial policy. Tariffs, pressure on supply chains, national security considerations, tax incentives for investment and governments’ fiscal needs simultaneously influence policy decisions. For companies, this may affect market access, effective tax costs and the possible consequences of disputes in different policy areas.
Another factor is the use of artificial intelligence by tax authorities to detect fraud and tax evasion, assess risks, monitor compliance, work with taxpayers and improve administrative efficiency. EY believes that businesses should strengthen coordination among tax, legal, financial, trade and logistics departments, use scenario planning and invest in real-time monitoring of changes.
