Multinationals split on impact of OECD plans for global tax reform

As the OECD’s Base Erosion and Profit Shifting (BEPS) project gathers pace, multinational companies are evenly divided over whether it is likely to create a more sustainable global tax system, even though most are in favour of international tax reforms, according to research by Taxand, coinciding with a major BEPS conference in Istanbul this week

The annual survey of multinational CFOs found they were split, with 52% agreeing that BEPS will deliver improvements compared to 48% who disagreed. While 80% of those polled think tax initiatives to fundamentally reform international tax architecture are desirable, just 55% think it is achievable.

CFOs felt that BEPS was likely to have a material operational impact, with 83% stating more robust requirements for global tax transparency will increase the cost of compliance.

Over three quarters (77%) of global respondents indicated concerns about the potential exposure of information provided to meet the country-by-country reporting standards. Despite this, over half (57%) were in favour of BEPS proposals in this area. 

The majority (83%) thought this would result in increased tax competition between countries over the next five years, while 76% believe BEPS will make countries more competitive from a corporate tax rate perspective. 

However,  over two thirds (68%) of survey respondents said they do not think a cut in corporate tax rates is more appealing than other tax incentives when it comes to considering possible relocation. A similar proportion (66%) said they would need a 5% or more change in a corporate tax rate to consider changing their business headquarters.

CFOs were divided on the issue of whether national tax authorities should be given responsibility to enforce BEPS at country level, favoured by 52%, or whether the OECD would be a better option (38%).

Frederic Donnedieu, chairman of Taxand, said: ‘The OECD’s BEPS Action Plan is designed to revolutionise the taxation of companies across the globe. Multinationals are facing a new frontier where the landscape is uncertain.’

For the fourth consecutive year, CFOs identified transfer pricing as the most challenging area of tax for multinationals, and also the area that has received the most significant increase in scrutiny over the past year.

Globally 60% of respondents reported an increase in the number of audits undertaken by tax authorities in the past year, with 70% of respondents also feeling their tax authority had increased its focus on substance.

The majority of CFOs (77%) also agreed that exposure to the public of corporate tax planning, particularly if perceived as ‘aggressive’, has a detrimental impact on reputation, up from 72% in 2012.

Nearly two thirds (63%) said the regular political discussion around potential new tax measures is causing confusion and uncertainty amongst business decision makers, making it difficult to successfully plan for the future.

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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