- AI powers audit precision
- Transfer pricing intensifies scrutiny
- Preparing for Pillar Two and beyond
- Strategic alignment: Delay is not an option
- Looking ahead in 2026
As global economic and trade volatility persist, businesses face mounting challenges from shifting tariff frameworks and increasingly complex tax regimes. Looking ahead to 2026, multinational enterprises (MNEs) must prepare for a tax environment that is more data and AI-driven and enforcement-focused than ever before. To future-proof their organizations, business leaders must proactively respond to the risks posed by a convergence of digital enforcement tools, heightened transfer pricing scrutiny, and the rollout of global minimum tax rules. In this climate, resilience and growth will hinge on how effectively organizations manage compliance, optimize tax positions, and mitigate risk within rapidly evolving regulatory landscapes.
AI powers audit precision
Around the world, tax authorities are accelerating their adoption of AI and advanced analytics to sharpen audit precision. According to Allen Tan, chair of Baker McKenzie's Asia Pacific Tax Group, authorities are increasingly leveraging predictive models to identify medium- to high-risk taxpayers as this can deliver far greater recoveries than traditional audit selection methods.
These algorithms can prioritize areas such as transfer pricing and intangible assets, which are critical to the technology and pharmaceutical sectors. At the same time, governments are strengthening cross-border cooperation by expanding exchange of information (EOI) frameworks and joint audit programs, signaling a decisive shift toward multilateral enforcement and coordination.
Transfer pricing intensifies scrutiny
Globally, transfer pricing remains a core focus of tax audits. For example, authorities are intensifying their review of intra-group services and royalty arrangements, requiring clear justification for the selection of transfer pricing methodologies and comparables, detailed documentation, and clear evidence of value creation.
Allen Tan notes, “Transfer pricing is not just about benchmarking. Authorities want the full narrative—where decisions occur, how value is generated, understanding where functional activities occur through an evaluation of the conduct of parties, and whether the numbers and contractual terms reflect economic reality.”
In the US and elsewhere, officials are increasingly deploying anti-abuse and economic substance arguments in transfer pricing cases. “In certain cases, adjustments are being made using current data that the taxpayer could not have predicted,” says Maria Antonia Azpeita, Baker McKenzie partner, Madrid.
This scrutiny increasingly intersects with trade and customs. As MNEs seek to manage their supply chain strategies to counter tariff disruptions, tax authorities are closely monitoring intercompany pricing. In response, many companies are turning to advance pricing arrangements (APAs) to secure certainty and avoid costly, prolonged disputes. Bilateral and multilateral APAs are gaining traction as strategic tools to mitigate double taxation and reduce compliance risks. Similarly, the mutual agreement procedure (MAP) remains a vital treaty-based mechanism for resolving cross-border disputes.
Preparing for Pillar Two and beyond
The OECD’s Pillar Two global minimum tax is transforming compliance obligations worldwide. The US and the OECD recently brokered a significant “side-by-side” agreement that could streamline these obligations. However, numerous jurisdictions are implementing Qualified Domestic Minimum Top-Up Tax (QDMTT) regimes that will still demand significant resources and attention. Businesses must now navigate Global Anti-Base Erosion (GloBE) reporting, safe harbor elections, and top-up tax calculations across multiple jurisdictions. Allen emphasizes that Pillar Two is not just another reform—it’s a compliance revolution. Companies need to rethink their internal systems and data architecture, governance, and the impact of organizational changes.
Strategic alignment: Delay is not an option
Tax enforcement is entering a new era of precision and aggression. Businesses that cling to outdated, reactive approaches are courting disaster. As enforcement becomes more sophisticated, coordinated and relentless, tax strategy can no longer operate in isolation—it must align seamlessly with operational realities to avoid exposing the business to high-impact risk. The path forward is clear: focus on pre-audit readiness and invest in real-time data integrity and tight collaboration across tax, legal and finance—while pursuing certainty where appropriate, especially for high-risk areas like IP, financing and restructuring.
Looking ahead in 2026
The bottom line is: companies should take action now to reduce exposure to risk but also gain a significant competitive edge in the evolving global tax landscape.
- Organizations should act now to establish robust governance frameworks for tax risk review and identification, compliance and documentation, and pursue certainty through mechanisms such as APAs.
- Businesses that invest in readiness today—rather than waiting for the audit—can turn risk into opportunity to promote better certainty for the business