BEPS focus drives global tax innovation

The impact of the tax reforms from the OECD’s base erosion and profit shifting (BEPS) project is driving governments around the world to introduce new or improved business incentives in order to compete, according to analysis by EY

The firm’s survey of 50 countries found that 30% intend to invest in broader business incentives to stimulate or sustain investment, with new or improved business incentives being offered in 27% more countries than in 2016.

Much of the focus is on introducing more generous research and development (R&D) incentives, which 22% plan to introduce in 2017, while new or improved R&D incentives are now being offered in 83% more countries than last year.

Eight of the 50 countries (16%) surveyed now have laws in place that will drive lower corporate income tax (CIT) rates this year. Seven of those are based in Europe (versus just three last year), including the UK, Luxembourg and France, suggesting that the epicenter of BEPS has moved into Europe and that countries in that region are reducing rates faster than countries elsewhere in a bid to encourage foreign direct investment.

Only one outlying country, Chile, forecasts a known or anticipated headline CIT rate increase in 2017.

The number of countries forecasting an increasing business tax burden continues to rise, with 22% expecting an overall increase in the CIT burden in 2017, compared to 18% in 2016.

Half (46%) of countries identify new BEPS-related transparency and disclosure requirements as the main sources of increases in their tax burden.

Nine jurisdictions forecast a higher indirect tax burden, as the worldwide spread of VAT and goods and services tax (GST) continues and technology is adopted more widely by tax administrations.

Chris Sanger, EY global tax policy leader, said: ‘Governments are increasingly adopting incentives as a pragmatic means to compete amid coordinated change across the tax landscape. Incentives can encourage and sustain business investment, allowing governments to respond to the dual pressures of continued weak economic growth and the introduction of new measures and legislation in response to tax reform in Europe and globally.’

EY’s report, Outlook for global tax policy 2017, is here.

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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