Regulatory complexity, heightened government enforcement and persistent uncertainty are converging to drive tax dispute risk to new levels.
Our flagship Global Disputes Forecast, which surveyed 600 senior decision-makers across the globe, revealed that in 2026 tax was anticipated as the second greatest dispute risk over the next 12 months.
A new wave of research reaffirms that tax controversies remain top-of-mind. In addition, the breadth of challenges respondents report facing underscores the systemic nature of tax risk.
Reactive, issue-specific management is insufficient. Organizations must proactively close internal capability gaps, reinforce their tax dispute frameworks and ensure coordinated oversight of audits so that they can respond effectively when a dispute arises.
External factors are driving tax controversy risk
Respondents in tax roles identify a dual-edged challenge when it comes to external tax dispute exposures: keeping up with complex and swiftly changing regulation, whilst also preparing for increased scrutiny and enforcement by tax authorities. All of this is occurring within an environment shaped by continued uncertainty and geopolitical pressure.
84% of tax respondents are concerned that global regulatory fragmentation in particular is opening their organization up to a potential tax dispute.
Fragmentation is a recurring theme across tax-related challenges. "Even in aspects where there used to be international alignment, there is now misalignment not just in terms of regulation but also tax authority positioning," says María Antonia Azpeitia, a partner in Madrid. "There is a clear challenge here: keeping up to speed in various locations and jurisdictions. If you don’t have a local, relevant tax presence, it is tough.”
Changes in tax authority positioning (82%) and fiscal pressure in the market (81%) are also cited as prominent drivers of dispute exposure. As governments focus on protecting tax revenues, taxpayers can expect more assertive enforcement approaches, increasing the propensity and intensity of disputes.
Further highlighting this increased scrutiny and enforcement by tax authorities, 73% of respondents in tax roles express concern that the digitization of tax administration could expose their organization to a potential dispute.
As tax authorities increasingly leverage AI-based auditing tools, this risk is expected to grow, according to Allen Tan, Asia Pacific tax practice chair. “Tax authorities tend to have better data. As they deploy more sophisticated technology to support audits, both taxpayers and advisors will need to grapple with the fact that the data that they have is not the same as the data that regulators might have," Tan says.
Breadth and complexity define top risk areas
Tax respondents' concerns around specific types of disputes reflect a similar breadth of challenges, from increased enforcement and scrutiny by tax authorities to evolving and fragmented regulation.
While just 28% of respondents ranked transfer pricing and cross-border transactions as top dispute risk areas, transfer pricing risks are also embedded elsewhere, particularly customs/tariffs and corporate income tax disputes.
Capital gains tax
46% of respondents report that disputes related to capital gains tax rank among their top concerns, potentially due to increased scrutiny of asset disposals and evolving rules across jurisdictions as governments seek to protect tax revenues.
Capital gains tax is a particular focus of tax authorities in EMEA, who are applying anti-abuse and beneficial ownership concepts to deny certain participation exemptions or impose higher exit taxes. "This is creating uncertainty for private equity, venture capital as well as third-time group structures with intermediate holding companies,” says Azpeitia.
Customs/tariff tax
Nearly half of respondents are concerned about the risk of disputes arising from customs/tariff tax, reflecting broader geopolitical uncertainty.
Effectively preparing for potential customs/tariff disputes requires both a thorough understanding of the supply chain and documentation preparation. "Oftentimes, systems aren't prepared for these types of audits because they are more closely linked to internal reporting," says Azpeitia.
Customs/tariff disputes can also arise in the context of characterizing certain intercompany payments. When drafting intercompany agreements, companies should not only evaluate for both transfer pricing and withholding considerations, but also potential customs implications.
Corporate income tax
40% of respondents identify corporate income tax as a top concern, reflecting the complexity of global tax frameworks.
This also suggests that transfer pricing, profit allocation, and cross-border structuring are driving disputes risk in an increasingly regulated environment, with complex Pillar Two implementation.
In the US, "the defining battlegrounds for US corporate taxpayers today remain transfer pricing and the IRS's aggressive and expanding application of the codified economic substance doctrine to dismantle transactions it views as tax-motivated, and the mounting penalties exposure that comes with both — all playing out against a backdrop of an understaffed agency that is nonetheless concentrating its remaining firepower on taxpayers with transactions it deems improper or mispriced," says Palo Alto partner Scott Frewing.
Spotlight on Pillar Two
The OECD's Pillar Two global minimum tax, in force as of 2024 in many jurisdictions, is undoubtedly one of the most significant tax developments in recent years and an area to watch for tax disputes.
Pillar Two seeks to apply a top-up tax to undertaxed profits calculated on the basis of a new set of rules, which are being implemented across many jurisdictions. However, inconsistent application of these rules will undoubtedly lead to a new area of potential tax disputes. Anticipating this, the OECD is expected to release rules and guidance on the topic of dispute prevention and resolution in the context of Pillar Two.
On the ground, Tan and Jorge Narváez-Hasfura, a partner in Mexico City, observe that more localized divergences in tax authority priorities mean that risk perception is only one part of the picture. Multinationals need to strengthen their tax disputes frameworks and flex dispute preparedness across all areas.
"In Asia Pacific, I see corporate income tax, transfer pricing and cross-border transactions as the top concerns in practice," says Tan. "We do see indirect tax issues sometimes in some countries as tax authorities may pivot to indirect taxes following a corporate income tax challenge.”
Narváez-Hasfura's adds that "in Mexico and some Latin American countries, the main issues are transfer pricing, customs and corporate income taxes."
Fragmented risks require coordinated approaches — both internally and externally
The systemic nature of tax disputes requires organizations to be prepared when potential issues inevitably arise. When managing tax disputes across borders, internal limitations such as resource constraints (43%) can exacerbate external challenges such as coordination difficulties (41%) and jurisdictional complexity (40%), according to tax respondents.
34% of respondents in tax roles also say that documentation gaps are a challenge when managing a cross-border tax dispute. This is significant given the importance of documentation in audits and compliance.
"The amount of information that the authorities request is significant, yet in many cases, companies do not have 100% of what’s needed,” says Narváez-Hasfura.
Limited resources mean organizations must calculate the risk of preparedness against the cost of a potential tax dispute, which can have both financial impacts and reputational consequences.
Key actions
Effective mitigation of tax-related risk and preparation for potential disputes require a partner who can address local nuances with global, consistent approaches to improve potential outcomes.
When looking to maximize existing resources to bolster dispute preparedness, organizations should:
- Centralize oversight across jurisdictions to ensure consistent audit responses.
- Track and leverage existing audits and documentation with appropriate safeguards.
- Close documentation gaps proactively with defensive files and contemporary documentation — before the audit, not after.
“Companies should consider proactively structuring a defensive file, understanding what tax authorities are looking for and what their positions are. Concerns around potential disputes will exist, but there is a way to be prepared for them," says Narváez-Hasfura.
The Convergence of Risk: Today's pressures, tomorrow's disputes
A series overview
Our flagship Global Disputes Forecast survey revealed that in 2026, geopolitical flux, technology and supply chain disruption are driving disputes risk externally, while resource constraints mean that organizations must also be intentional and flexible in where they allocate resources.
With robust disputes preparedness key to building organizational resilience, we commissioned another wave of research to delve further into these initial findings. In this series, we explore the intersection of key risk areas and identify how respondents are taking action.
Methodology
We surveyed 600 senior decision-makers with oversight or key roles in legal, risk, compliance, or tax functions. Respondents included Directors in Legal, Risk, Compliance, or Tax, Heads of Function/Departmental Leaders, and C-suite roles such as General Counsel, Chief Legal Officer, Chief Risk Officer, and Chief Compliance Officers.
