Global companies are mapping their supply chains in the wake of the Covid-19 pandemic to gauge their resilience and better prepare for black swan events in the future, according to a World Bank official.
Political and policy concerns are risks for the global supply chain, which “turned out to be somewhat more resilient than people had thought”, Caroline Freund, the World Bank’s director for trade, investment and competitiveness, told the online Global Manufacturing and Industrialisation Summit on Saturday.
She said companies were “thinking of building more redundancy into their supply chains to reduce risk. This is something we will see particularly in critical supply chains [such as] medicines and medical equipment. We have already seen that with food and fuels”.
There were serious questions posed on the strength and viability of the global value chain – the system of mapping people and activities involved in the production of goods and services and its supply and distribution – at the beginning of the pandemic, she said.
However, the initial supply concern was quickly overtaken by the demand shock as borders closed and people were confined to their homes in many parts of the world, leading to a sharp fall in consumption.
“It ended up being a much stronger shock [for businesses] than accessing goods from other countries,” she said. “Demand has become a real concern.”
The pandemic brought the global trade, travel and tourism sectors to a halt in the first half of the year, tipping the world’s economy into a recession that is expected to be the deepest since the Great Depression, according to the International Monetary Fund.
The multilateral lender forecast in June that global gross domestic product would shrink by 4.9 per cent this year.
Global trade is expected to decline by 27 per cent in the second quarter of this year, compared with the previous three months, according to data by the UN Conference on Trade and Development. Global production and manufacturing output are set to decline by 9 per cent, compared with a year ago, UNCTAD said in May.
There are signs of a bounce-back, however, and the recovery is better than what was registered during the global financial crisis, Ms Freund said.
Data from the global shipping industry as of mid-August showed that trade was returning to “normal” but the recovery remained uneven in some regions.
“The biggest rebounds are in East Asia and the Pacific ... similarly South Asia,” Ms Freund said. “North America and Latin America remain weaker than before.”
Despite a recovery in the trade of goods, the services sector took a hit from the slowdown in the travel and tourism sectors, she said.
Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
