diff --git a/src/CONST.ts b/src/CONST.ts
index 3c53f083abac..a00be3f94ba4 100755
--- a/src/CONST.ts
+++ b/src/CONST.ts
@@ -4132,6 +4132,22 @@ const CONST = {
     SESSION_STORAGE_KEYS: {
         INITIAL_URL: 'INITIAL_URL',
     },
+    DEFAULT_TAX: {
+        defaultExternalID: 'id_TAX_EXEMPT',
+        defaultValue: '0%',
+        foreignTaxDefault: 'id_TAX_EXEMPT',
+        name: 'Tax',
+        taxes: {
+            id_TAX_EXEMPT: {
+                name: 'Tax exempt',
+                value: '0%',
+            },
+            id_TAX_RATE_1: {
+                name: 'Tax Rate 1',
+                value: '5%',
+            },
+        },
+    },
 } as const;
 
 type Country = keyof typeof CONST.ALL_COUNTRIES;
diff --git a/src/libs/API/parameters/EnablePolicyTaxesParams.ts b/src/libs/API/parameters/EnablePolicyTaxesParams.ts
index 4a235d5d6a1f..5517bd442231 100644
--- a/src/libs/API/parameters/EnablePolicyTaxesParams.ts
+++ b/src/libs/API/parameters/EnablePolicyTaxesParams.ts
@@ -1,6 +1,7 @@
 type EnablePolicyTaxesParams = {
     policyID: string;
     enabled: boolean;
+    taxFields?: string;
 };
 
 export default EnablePolicyTaxesParams;
diff --git a/src/libs/actions/Policy.ts b/src/libs/actions/Policy.ts
index 1f48525e3378..afb2d307b2a5 100644
--- a/src/libs/actions/Policy.ts
+++ b/src/libs/actions/Policy.ts
@@ -83,6 +83,7 @@ import type {
     ReimbursementAccount,
     Report,
     ReportAction,
+    TaxRatesWithDefault,
     Transaction,
 } from '@src/types/onyx';
 import type {ErrorFields, Errors, OnyxValueWithOfflineFeedback, PendingAction} from '@src/types/onyx/OnyxCommon';
@@ -3664,6 +3665,62 @@ function enablePolicyTags(policyID: string, enabled: boolean) {
 }
 
 function enablePolicyTaxes(policyID: string, enabled: boolean) {
+    const defaultTaxRates: TaxRatesWithDefault = CONST.DEFAULT_TAX;
+    const taxRatesData: OnyxData = {
+        optimisticData: [
+            {
+                onyxMethod: Onyx.METHOD.MERGE,
+                key: `${ONYXKEYS.COLLECTION.POLICY}${policyID}`,
+                value: {
+                    taxRates: {
+                        ...defaultTaxRates,
+                        taxes: {
+                            ...Object.keys(defaultTaxRates.taxes).reduce(
+                                (prevTaxesData, taxKey) => ({
+                                    ...prevTaxesData,
+                                    [taxKey]: {
+                                        ...defaultTaxRates.taxes[taxKey],
+                                        pendingAction: CONST.RED_BRICK_ROAD_PENDING_ACTION.ADD,
+                                    },
+                                }),
+                                {},
+                            ),
+                        },
+                    },
+                },
+            },
+        ],
+        successData: [
+            {
+                onyxMethod: Onyx.METHOD.MERGE,
+                key: `${ONYXKEYS.COLLECTION.POLICY}${policyID}`,
+                value: {
+                    taxRates: {
+                        taxes: {
+                            ...Object.keys(defaultTaxRates.taxes).reduce(
+                                (prevTaxesData, taxKey) => ({
+                                    ...prevTaxesData,
+                                    [taxKey]: {pendingAction: null},
+                                }),
+                                {},
+                            ),
+                        },
+                    },
+                },
+            },
+        ],
+        failureData: [
+            {
+                onyxMethod: Onyx.METHOD.MERGE,
+                key: `${ONYXKEYS.COLLECTION.POLICY}${policyID}`,
+                value: {
+                    taxRates: undefined,
+                },
+            },
+        ],
+    };
+    const policy = allPolicies?.[`${ONYXKEYS.COLLECTION.POLICY}${policyID}`];
+    const shouldAddDefaultTaxRatesData = (!policy?.taxRates || isEmptyObject(policy.taxRates)) && enabled;
     const onyxData: OnyxData = {
         optimisticData: [
             {
@@ -3678,6 +3735,7 @@ function enablePolicyTaxes(policyID: string, enabled: boolean) {
                     },
                 },
             },
+            ...(shouldAddDefaultTaxRatesData ? taxRatesData.optimisticData ?? [] : []),
         ],
         successData: [
             {
@@ -3689,6 +3747,7 @@ function enablePolicyTaxes(policyID: string, enabled: boolean) {
                     },
                 },
             },
+            ...(shouldAddDefaultTaxRatesData ? taxRatesData.successData ?? [] : []),
         ],
         failureData: [
             {
@@ -3703,11 +3762,14 @@ function enablePolicyTaxes(policyID: string, enabled: boolean) {
                     },
                 },
             },
+            ...(shouldAddDefaultTaxRatesData ? taxRatesData.failureData ?? [] : []),
         ],
     };
 
     const parameters: EnablePolicyTaxesParams = {policyID, enabled};
-
+    if (shouldAddDefaultTaxRatesData) {
+        parameters.taxFields = JSON.stringify(defaultTaxRates);
+    }
     API.write(WRITE_COMMANDS.ENABLE_POLICY_TAXES, parameters, onyxData);
 
     if (enabled) {