Why organizations, tax administrations should prepare for the future of work

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The world is moving away from mechanistic and industrial models. [Courtesy]

The world is going through a transformation driven by digitization, innovation, climate change and cultural change. Some have called it a VUCA (Volatility, Uncertainty Complexity and Ambiguity) world based on the leadership theories of Warren Bennis and Burt Nanus. This,

It is characterized by constant and unpredictable changes that have become the norm in all industries and other facets of life.

It requires agile and flexible management and leadership in the public and private sectors.

The world is moving away from mechanistic and industrial models.

In its place, a fluid, human and digital future is emerging, forcing organizations and employees to adapt. Organizations must build structures that allow them to pursue their growth and autonomy at work.

Alternative approaches to work have emerged that require a different way of working – forcing organizations to re-evaluate their jobs. These include artificial intelligence, automation, and the odd-job economy.

Employees are also required to develop, develop or develop to be able to meet the needs of agile organizations.

Automation replaces, augments or transforms some exclusive tasks and roles of employees and data will remain a vital asset for modern organizations.

It is the new petroleum of the 21st century with digitization and interconnection leading to the growth of structured and unstructured data.

However, taxes remain a major source of government revenue.

Tax agencies must remain alert to changes in the future of work that may reduce tax revenues or change the tax base.

At the EY 2021 Annual Tax Summit in October, panelists said Covid-19 had led to a review of their approach to staff mobility.

It was noted that the movement of workers from one country to another decreased during the period. The Kenya Revenue Authority (KRA) collected Sh 362.08 billion in Pay As You Earn (PAYE) in 2020/21, compared to Sh 399.2 billion collected in 2019/20.

Multinationals have embarked on transformation projects, including automating and restructuring their operations by outsourcing their secondary services, resulting in job losses.

These will likely lead to a drop in PAYE as more tasks are automated and companies move some of their functions to other jurisdictions.

The emergence of the concert economy will allow locals to provide their services to organizations around the world.

These changes are forcing organizations and tax administrations to monitor the evolving future of work and align their expectations and strategies.

-The author is Senior Tax Director at EY. The opinions expressed here are not necessarily those of EY.


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