Effective management of tax disputes for multinational enterprises

October 2025  |  SPECIAL REPORT: CORPORATE TAX

Financier Worldwide Magazine

October 2025 Issue

Governments across the world are devoting unprecedented attention to the tax affairs of multinational enterprises (MNEs). With this focus, we are seeing a significant increase in the number of tax investigations and disputes. In this article, we examine the context in which these disputes arise and the proactive strategies that MNEs can adopt to prepare and respond.

The new context: global transparency and cross-border cooperation

The modern tax dispute environment is shaped by one overarching reality: tax authorities know more about taxpayers than ever before.

According to the Organisation for Economic Cooperation and Development (OECD) and Global Forum Report to G20 Finance Ministers and Central Bank Governors (2025): “By 2024, 111 jurisdictions, varying in capacity and level of development, have commenced annual exchanges of information on financial accounts held by taxpayers outside of their jurisdiction of residence. The scale of information exchanged is vast, with information on over 171 million financial accounts with a value of nearly EUR 13 trillion exchanged in 2024.”

The same report notes that “Global Forum members reported that enhanced tax transparency and [Exchange of Information] helped uncover at least EUR 135 billion in additional revenues since 2009”.

These figures reflect tangible recoveries for tax authorities, driven by the automatic exchange of data and the growing use of that data in targeted investigations.

The information exchange regimes: CRS and FATCA

Two initiatives dominate the global exchange landscape: the Common Reporting Standard (CRS) and the US Foreign Account Tax Compliance Act (FATCA). Developed by the OECD, the CRS obliges financial institutions (FIs) in participating jurisdictions to collect and report information about accounts held by non-residents. This data is then automatically exchanged between jurisdictions annually. The FATCA is a US regime requiring non-US FIs to report details of accounts held by US taxpayers (or foreign entities in which US taxpayers hold substantial ownership).

Between them, the CRS and the FATCA have given tax authorities a detailed global map of financial holdings. Crucially, these are not dormant datasets – they are actively mined for anomalies, mismatches and triggers for further investigation. Although the results are mixed in terms of the quality of conclusions reached by tax authorities using this data, what is absolutely clear is the increasing number of investigations and targeted tax compliance activity off the back of such data.

Tax authorities are working together

The exchange of information is not the only sign of growing cooperation. Tax authorities are increasingly coordinating enforcement action, sharing intelligence in real time, and even conducting joint audits.

Mechanisms for collaboration include cooperation under the OECD Multilateral Convention on Assistance in Tax and joint working of tax investigation matters through the OECD’s Forum on Tax Administration and Joint International Taskforce on Shared Intelligence and Collaboration (JITSIC). In the UK, HM Revenue & Customs (HMRC) has previously confirmed that it works with JITSIC to share information, identify international tax issues and coordinate challenges against MNEs.

HMRC notes in its manual dealing with the International Exchange of Information (IEIM130300): “There will be circumstances with multinational enterprises, and some high-net worth individuals with complex international affairs, where it will be beneficial for multiple tax authorities to work together in a joint audit. These are sometimes called Multilateral Controls, or MLCs.

“This sort of closer working is increasingly common, particularly where there are transactions that cross borders or the business has a company or team that performs the same functions in multiple territories (such as a group services company that performs services for trading entities across Europe)…”

The practical outcome is that MNEs now face multi-front disputes that require a coordinated and consistent global strategy.

How multinationals should respond

The question then arises for MNEs: what does effective management look like? The approaches outlined below are central to protecting the business.

Proactive self-audit and risk profiling. The best time to address a risk is before it becomes an investigation.

A well-structured self-audit programme allows a business to identify potential exposure early, rectify issues and, critically, build a strong compliance profile with tax authorities.

In the UK, HMRC maintains a ‘risk rating’ for large businesses, and those rated as ‘low risk’ often face lighter-touch monitoring. In other jurisdictions, similar formal or informal assessments exist. A good risk profile is an asset and MNEs work hard to maintain their risk rating. Indeed, we have seen large businesses engaging external consultants whose sole purpose is to assist them in maintaining and improving their risk rating.

Self-audit is not just a compliance exercise; it is also defensive. In the UK, HMRC has just initiated its first criminal prosecution for the “failure to prevent the facilitation of tax evasion” offence, introduced by the Criminal Finances Act 2017. Under this legislation it can be a criminal offence in the UK if a business fails to prevent its employees or any person associated with it (this includes agents and certain service providers) from facilitating tax evasion. It is a defence to have in place reasonable procedures to prevent the facilitation of tax evasion. An important part of this should be proactive self-audit.

On 1 September 2025, the new failure to prevent fraud offence under the Economic Crime and Corporate Transparency Act 2023 comes into force in the UK. This legislation widens even further the compliance requirements on MNEs and further underlines the need for comprehensive prevention procedures.

Managing risk with tax insurance. MNEs acquiring tax insurance policies that cover specific tax risks is becoming an increasingly common tool for managing contingent risk. Usually, such insurance policies rely on robust legal opinions.

If a dispute then arises, it is essential to engage with the insurer promptly to avoid coverage disputes. Many policies allow the insurer to appoint its own advisers to run the defence. While this can be acceptable, MNEs should also seek independent advice to ensure alignment with the company’s wider litigation and reputational strategy.

The takeaway: tax insurance can be a valuable backstop, but it should be integrated into the MNE’s overall dispute management framework rather than treated as a standalone product.

Build a holistic litigation strategy. Too often, tax litigation is approached as a purely technical exercise: is the tax position correct under the law? While that is obviously critical, it is not the whole picture.

Courts and tribunals globally are adopting an increasingly purposive approach in the context of tax litigation, looking beyond the letter of the law to the broader commercial reality. This means that evidence – contemporaneous documentation, witness evidence and narrative coherence – is as important as legal analysis.

A robust litigation strategy for MNEs should involve internal and external counsel stress-testing the case not just on the technical merits, but on credibility, presentation and the potential for settlement.

Information notices and data protection compliance. In responding to information requests, MNEs must be alert to their broader legal obligations such as data protection laws – particularly the European Union’s General Data Protection Regulation – which impose restrictions on how personal data can be processed and transferred.

If a tax authority’s request would involve disclosing personal data, there must be a lawful basis and appropriate safeguards before doing so. Failing to check this could expose the MNE to regulatory penalties in addition to tax liabilities.

On a practical level, it is often assumed that requests made by tax authorities must be valid and binding. However, often overreach by tax authorities and poorly prepared requests result in invalid requests and subsequently data protection risks for MNEs that comply with them.

It is imperative that MNEs properly consider such requests, their validity and the wider implications of complying with them. In certain circumstances, it may be appropriate to resist such requests.

Proactive dispute management tools. Waiting passively for an investigation to run its course can be costly. Many jurisdictions offer procedural tools to accelerate resolution – if you know how to use them.

In the UK, in certain circumstances a taxpayer can apply for a closure notice to force HMRC to bring an enquiry to an end, particularly where delays are unjustified. This can be especially valuable if a corporate transaction is contemplated and uncertainty over tax positions is holding up the deal.

Elsewhere, mechanisms such as ‘fast-track settlements’ or advance rulings can serve similar purposes and should form part of the holistic litigation strategy of any MNE.

Alternative dispute resolution and arbitration. Alternative dispute resolution (ADR) in tax disputes is no longer novel. Many tax authorities, including HMRC, now have structured ADR processes, allowing disputes to be resolved through facilitated discussions rather than litigation.

For cross-border disputes, tax arbitration – as provided for in some double tax treaties – can be an effective way to break a deadlock between two jurisdictions.

While these routes may not always be suitable, they should form part of the initial dispute strategy assessment.

Bringing it all together: an integrated approach

Managing an international tax dispute is not just about reacting to letters from tax authorities in different jurisdictions. It requires: (i) preparation – understanding where the risks lie and documenting compliance, preferably in advance of receiving letters from tax authorities; (ii) coordination – ensuring a consistent approach across jurisdictions to avoid contradictions; (iii) expertise – combining technical tax advice with litigation, procedural and reputational insight; and (iv) agility – using available tools to shape the process rather than simply respond to it.

Summary

The message is clear: the globalisation of tax disputes is no longer anticipated – it is here. With unprecedented levels of information exchange, deeper cooperation between tax authorities and a sustained political drive for enforcement, MNEs cannot afford a reactive stance.

By investing in proactive self-audit, integrating risk transfer tools like tax insurance, building holistic litigation strategies, and making full use of procedural and alternative resolution mechanisms, MNEs can not only defend themselves effectively but also position themselves as trusted, compliant partners in the jurisdictions where they operate.

The result is not immunity from investigation (no MNE can guarantee that) but resilience, credibility and control over the dispute process. In the high-stakes, multijurisdictional tax environment of 2025, that is a competitive advantage in its own right.

 

Matthew Sharp is a partner and Wesley Grimm is an associate at Brown Rudnick LLP. Mr Sharp can be contacted on +44 (0)20 7851 6068 or by email: msharp@brownrudnick.com. Mr Grimm can be contacted on +44 (0)20 7851 6020 or by email: wgrimm@brownrudnick.com.

© Financier Worldwide

BY

Matthew Sharp and Wesley Grimm

Brown Rudnick LLP

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