Global tax cooperation is becoming increasingly fragmented, with businesses facing greater uncertainty as negotiations at the OECD and United Nations progress along different tracks while governments pursue regional and unilateral measures, EY has warned.

The consulting firm said the international tax landscape was shifting away from a single, consensus-driven process towards multiple forums, overlapping initiatives and uneven timetables, with tax policy increasingly intertwined 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 formed part of its 2026 Tax Policy and Controversy Outlook, which examined how the changing international policy environment could affect businesses.

The firm said the fragmentation was particularly visible in the growing number of forums dealing with international taxation.

The OECD Inclusive Framework remained central to initiatives including global mobility and transfer pricing, although much of its current work was focused on administration and review, particularly implementation of the Pillar Two global minimum tax.

Progress on OECD Pillar One remained stalled, although countries were exploring a possible fresh start through constructive dialogue, with the United States calling for discussions to return to first principles.

EY said one apparent priority of the discussions was to slow or contain the spread of digital services taxes, rather than establish a multilateral system for reallocating taxing rights.

The United Nations, meanwhile, was developing its own Framework Convention on International Tax Cooperation, with results expected in late 2027.

The UN process has both political and technical objectives, including creating a more inclusive forum for international tax rulemaking and strengthening the role of developing countries in determining how cross-border income should be taxed.

EY highlighted two important differences between the UN process and the OECD approach.

UN decision-making does not require consensus, meaning substantive issues can be decided by majority vote, including a two-thirds majority for protocols.

This could make it easier to adopt outcomes that do not have the support of all major economies.

The UN negotiations also draw heavily on existing UN technical work, with greater emphasis on source-based taxation.

At the same time, the UN Committee of Experts on International Cooperation in Tax Matters has been expanding and systematising its technical work across a broad range of tax issues.

Although its outputs are non-binding, EY said they could increasingly influence treaty practice and feed into the UN Framework Convention process, despite the committee’s limited formal political authority.

For companies, the result is a more complicated policy environment in which multiple negotiations can take place simultaneously, sometimes overlapping and sometimes moving in different directions.

EY said the central challenge was therefore not necessarily any individual tax rule but the need to manage requirements, timetables and expectations that might not align.

Artificial intelligence is emerging as another major factor in the evolution of tax administration, with the OECD and UN broadly aligned on its growing importance.

Tax authorities are increasingly using AI for fraud and evasion detection, risk assessment, compliance monitoring, taxpayer services and administrative efficiency.

EY said the growing use of such systems was also raising expectations for businesses as they sought to manage increasingly complex 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 warned that tax, trade and industrial policy were becoming increasingly intertwined, with tariffs, supply-chain pressures, national security considerations, tax incentives for investment and governments’ fiscal needs increasingly influencing policy decisions together.

The convergence means tax measures can lead to trade responses, while trade negotiations can influence tax outcomes, the firm said.

For businesses, this can affect market access, effective tax costs and the potential consequences of disputes across different areas of policy.

“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.

Where multilateral coordination moves slowly, governments are increasingly pursuing unilateral measures to raise revenue, protect tax bases or respond to domestic political pressures.

EY also pointed to the emergence of smaller international alliances, including the Australia-Canada-India Technology and Innovation trilateral partnership.

The partnership is intended to strengthen cooperation between the three countries on critical minerals, emerging technologies and supply-chain resilience.

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

The arrangement illustrates how governments outside traditional power blocs can develop closer economic relationships around shared priorities, according to EY.

“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 environment required businesses to rethink how they assessed policy risk.

Tax, trade, legal, finance and supply-chain teams increasingly needed to develop a shared understanding of how developments in one area could affect another.

A decision intended to mitigate tariffs or strengthen supply-chain resilience, for example, could have tax consequences, while tax changes could affect broader commercial decisions.

The firm said scenario planning was becoming more important than attempting to predict a single outcome, particularly where negotiations remained unresolved or politically sensitive.

Businesses should also continue engaging with policymakers, but focus more closely on the places where outcomes were actually being shaped, including bilateral discussions, regional initiatives and implementation guidance.

Speed was another increasingly important factor, as policy changes could occur rapidly and sometimes outside traditional legislative cycles.

EY said investment in real-time monitoring, strong data systems and agile governance could help businesses respond earlier rather than react after changes had already affected their operations.

Looking ahead, EY said global tax cooperation was unlikely to be defined by a single overarching agreement.

Instead, the next phase was expected to comprise a mosaic of deals, workarounds and negotiated trade-offs, requiring companies to integrate tax, trade and wider business decision-making.

The firm said businesses would need greater real-time visibility across functions and the ability to make decisions before policy changes reached their operations.

The overall shift, EY concluded, was towards a global tax system in which cooperation continued but increasingly took place through different forums, regional arrangements and national initiatives rather than through one unified process.