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Taxand Global Survey 2014: Substance, reform & reputational risk

Taxand Global Survey 2014: Substance, reform & reputational risk
Global
3 Feb 2014
Three quarters of multinational CFOs are experiencing uncertainty due to political debate around new tax measures.

The annual global survey of multinational CFOs conducted by Taxand, the world’s largest global organisation of tax advisors to multinational businesses, has shown that multinationals are suffering from increasingly confusing messages around tax legislation by regulators and governments worldwide. 74% said that regular political discussion around potential new tax measures is causing uncertainty amongst business decision makers.
 
Confusion dominates the global tax arena. Court cases, political and media scrutiny of multinationals’ tax planning, frequent amendments to legislation, retrospective taxes and the introduction of new cross border tax measures such as the Financial Transaction Tax and guidelines such as BEPs has led to an air of uncertainty. The absence of legislative stability and consistency is impacting the confidence of those with the power to fuel the global economy.

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The Taxand Global Survey was conducted amongst multinational clients across Europe, the Americas and Asia, and also produced the following key findings:

Highlights

Tax planning in a hostile environment

  • 76% of our survey respondents said that the exposure in the media of corporate tax planning activity has a detrimental impact on a company’s reputation
  • 31% said that the intense media focus on tax planning had made them change their approach to tax planning

Substance

  • 74% of respondents felt that their tax authority has been more focused on substance in the last year

The transfer pricing witch hunt

  • 20% of respondents, the biggest proportion of responses by some margin,  confirmed transfer pricing as the most challenging aspect of global taxation

The impact of harmonisation

  • 82% of global respondents felt that their tax authority had been co-operating more with other tax authorities around the world over the past year
  • Less than half of multinational respondents felt a global profit split approach to tax reform is a realistic solution for corporate taxation

Scrutiny and the search for tax revenues

  • 73% of respondents are seeing a rise in the frequency of tax audits as governments across the globe continue to scramble for tax revenues
  • Looking beyond corporate tax revenues is also an acknowledged trend – VAT, for example, is becoming an increasingly pivotal revenue raiser for governments
  • 78% of multinationals have reported a rise in compliance costs over the past year

Tax remains high on board agendas

  • 70% of respondents see corporate tax as on the board’s agenda, with the year ahead promising to be as important as the last with legislative change set to continue

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Taxand's Take

"Worldwide, we have seen political leaders speak at length about the taxation of multinationals, proposing sweeping change on a national and international level, from the transaction tax in Europe, to the OECD’s initiative around Base Erosion and Profit Shifting (BEPS), to retrospective tax litigation charges in parts of Asia. This uncertainty around tax is damaging multinationals’ confidence to invest and subsequently hindering the global recovery.

“Our annual survey shows that tax authorities have focused on the issues of substance and transfer pricing reforms in the last year.  Co-operation with other authorities around the world through data sharing and agreements, and the frequency of audits have increased. As governments and politicians have honed their focus on multinationals’ tax practices, dealing with the potential reputational risk arising from media and public scrutiny has remained a key issue for many companies. The need for multinationals to be confident in their tax planning has never been stronger.”

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