Global Tax Cooperation Becomes More Fragmented, Creating Greater Uncertainty for Businesses

Global tax cooperation is becoming increasingly fragmented, leaving businesses to navigate a more uncertain policy environment as negotiations at the Organisation for Economic Co-operation and Development (OECD) and the United Nations move along separate paths, while governments increasingly introduce regional and unilateral measures, according to EY.

The consulting firm said the international tax system was moving away from a single, consensus-based process towards a landscape characterised by multiple forums, overlapping initiatives and different implementation schedules. At the same time, tax policy is becoming more closely connected with trade, tariffs and industrial strategy.

“Companies today are operating in a world marked by changing relationships and evolving alliances, where cooperation often takes a backseat to competitiveness,” said Aruna Kalyanam, EY Global and EY Americas Tax Policy Leader.

“Global policy cooperation is shifting and is more guided by the alignment of geopolitical and economic interests,” she said.

EY's assessment is included in its 2026 Tax Policy and Controversy Outlook, which examines the potential impact of the changing international policy environment on businesses.

According to the firm, the growing fragmentation is particularly evident in the increasing number of international forums dealing with taxation.

The OECD Inclusive Framework continues to play a central role in areas including global mobility and transfer pricing. However, much of its current activity is focused on administration, implementation and review, particularly in relation to the Pillar Two global minimum tax.

Progress on OECD Pillar One remains stalled, although governments are considering whether constructive dialogue could provide a route towards a new beginning. The United States has called for negotiations to return to first principles.

EY said one apparent objective of these discussions was to slow or limit the expansion of digital services taxes rather than create a comprehensive multilateral framework for reallocating taxing rights between jurisdictions.

In parallel, the United Nations is developing its own Framework Convention on International Tax Cooperation, with the process expected to produce results in late 2027.

The UN initiative has both political and technical aims. These include establishing a more inclusive platform for international tax rulemaking and giving developing countries a stronger role in determining the taxation of income generated across borders.

EY identified two significant differences between the UN process and the OECD approach.

First, decisions within the UN process do not have to be reached through consensus.

Substantive matters can instead be determined through majority voting, while protocols require a two-thirds majority.

This structure could make it easier for decisions to be adopted even when they do not have the backing of all major economies.

Second, the UN negotiations rely extensively on existing technical work undertaken within the United Nations and place greater emphasis on source-based taxation.

At the same time, the UN Committee of Experts on International Cooperation in Tax Matters has been broadening and organising its technical work across a wide range of taxation issues.

Although the committee's work is not legally binding, EY said its outputs could increasingly shape treaty practices and contribute to the development of the UN Framework Convention, despite the committee having limited formal political authority.

For companies, the result is a substantially more complex international tax environment. Multiple negotiations can now occur at the same time, with some initiatives overlapping while others progress according to entirely different timelines.

EY said the principal difficulty for businesses is therefore not necessarily any single tax measure. Instead, companies must manage a collection of requirements, deadlines and policy expectations that may not necessarily be consistent with one another.

Artificial intelligence is also becoming an increasingly important influence on the future of tax administration. EY noted that the OECD and United Nations are broadly aligned in recognising the growing significance of AI.

Tax administrations are making greater use of artificial intelligence to detect fraud and tax evasion, assess risks, monitor compliance, provide taxpayer services and improve administrative efficiency.

The increasing deployment of these technologies is also raising expectations among businesses, which are themselves attempting to manage increasingly complicated and interconnected policy requirements

“In a fragmented global policy environment, tax leaders need more than technical insight – they need intelligent systems that can connect data, model outcomes and respond at speed,” said Martin Fiore, EY Americas Vice Chair – Tax.

“By embedding AI across the tax function, in compliance, analytics and governance, teams can move from reacting to policy change to anticipating it and acting with confidence,” he said.

EY also highlighted the growing relationship between taxation, trade and industrial policy.

Tariffs, supply-chain pressures, national security concerns, investment-related tax incentives and governments' fiscal requirements are increasingly being considered together when policy decisions are made.

The firm said this convergence means tax measures can trigger trade responses, while trade negotiations can in turn affect tax outcomes.

For businesses, the interaction between these policy areas can influence market access, effective tax costs and the possible consequences of disputes extending across different policy domains.

“Tariff pressure, supply chain shifts, global tax negotiations and increasing enforcement are so closely linked and require companies to very quickly navigate risk, capture opportunities and make strategic decisions on where to operate,” said Lynlee Brown, Partner, Global Trade, Ernst & Young LLP.

“This is really difficult unless you have a multifaceted approach where you have insights and inputs that are coming from all the different perspectives to align on what is best for that organisation as a whole,” she said.

As multilateral coordination takes longer, governments are increasingly turning to unilateral measures. These can be designed to increase revenue, safeguard domestic tax bases or address political pressures at home.

EY also highlighted the emergence of smaller international partnerships, including the Australia-Canada-India Technology and Innovation trilateral partnership.

The partnership is designed to deepen cooperation between Australia, Canada and India in areas such as critical minerals, emerging technologies and supply-chain resilience.

A trilateral memorandum of understanding was signed in March 2026, establishing the framework and objectives for the partnership.

EY said the agreement demonstrates how governments outside traditional geopolitical power blocs can develop closer economic ties around common strategic priorities.

“By deepening collaboration on technology and innovation, the group has the potential to better align incentives and standards across three economies, shaping how they approach tax cooperation over time,” said Sameer Gupta, EY India Leader, Tax.

“It also offers a model of trust-based collaboration, showing how countries outside traditional power blocs can come together on economic and tax policy in a way that balances growth and fairness in an increasingly fragmented global landscape,” he said.

EY said the changing policy environment means businesses also need to reconsider how they identify and assess policy risks.

Tax, trade, legal, finance and supply-chain functions increasingly need to develop a common understanding of how developments in one area can affect decisions and exposures in another.

For example, a business decision designed to reduce the impact of tariffs or improve supply-chain resilience could create tax implications. Conversely, a change in tax policy could influence wider commercial and investment decisions.

Against this backdrop, EY said scenario planning is becoming more important than trying to forecast one definitive outcome. This is particularly relevant when negotiations remain unresolved, politically sensitive or subject to rapid change.

Businesses should continue to engage with policymakers, the firm said, but should place greater emphasis on the forums and processes where actual outcomes are being determined. These increasingly include bilateral negotiations, regional initiatives and implementation guidance.

Speed is also becoming a more important consideration because policy changes can happen quickly and, in some cases, outside traditional legislative timetables.

EY said investment in real-time monitoring, robust data infrastructure and agile governance could enable companies to identify developments earlier and respond before policy changes begin affecting their operations.

Looking ahead, EY does not expect global tax cooperation to be defined by one comprehensive agreement.

Instead, the next phase of international tax policy is likely to consist of a “mosaic” of agreements, workarounds and negotiated compromises. Businesses will therefore need to integrate tax considerations with trade policy and broader commercial decision-making.

The firm said companies will require greater real-time visibility across their organisations, together with the ability to make informed decisions before changes in tax and trade policy reach their operations.

Overall, EY expects the global tax system to evolve into one where international cooperation continues, but increasingly takes place through different institutions, regional arrangements and national initiatives rather than through a single, unified process. 

By fLEXI tEAM