Forum: Transfer Pricing, Tax Enforcement to Drive Higher Tax Burden

The establishment of the ASEAN Economic Community in 2015 amid rapid changes to the global tax landscape means that ASEAN countries must pick up the pace of change and alignment of national laws and policies.

This was among the topics discussed at the inaugural EY Asean Tax Forum 2016: The Future of Tax, a by-invitation event that took place at Raffles Hotel Singapore today. The Forum was attended by close to 100 participants comprising tax leaders of top organizations from the region and EY tax practitioners.

“Developments such as the increasing focus on transparency, exchange of information, and need for business substance in organization structures from a tax perspective, as well as the OECD’s recommendations on Base Erosion and Profit Shifting (BEPS), are already triggering policy responses from governments, including a number from ASEAN,” says Yeo Eng Ping, EY Asean Tax Leader highlights the tax challenges that businesses and governments.

“At the same time, to achieve the vision for ASEAN Economic Community to become highly integrated and cohesive by 2025, the pace of change and alignment among the ASEAN countries in terms of national laws and policies must progress much more quickly than before.”

Cautious global response to BEPS

One of the key concerns of tax leaders today is the tax uncertainty and implications due to the BEPS regulations.

According to the EY Outlook for global tax policy in 2016 report, despite the announcement of final BEPS regulations in October 2015, many countries appear to be waiting for early adopters to set the pace before introducing national tax rules. The report showed that the majority of countries have yet to begin implementation of most of the 15 BEPS recommendations.

“The G20 and OECD are pushing very hard for consistent implementation of the BEPS package through the multilateral agreement and the Inclusive Framework, which 87 jurisdictions have signed up to thus far,” says James Badenach, EY Asia-Pacific Financial Services International Tax Services Leader, who spoke on “The changing global tax landscape.”

“Globally, corporate income tax rates continue to fall as jurisdictions desire to possess a competitive, ‘low-rate, broad-base’ business environment. This is a trend that we have seen for some time now.”

The report showed that more jurisdictions are forecast to lower the burden in 2016 (34%, compared to 16% in 2015), while 45% project no change at all. In addition, seven (which include Malaysia and Vietnam) of the 38 jurisdictions surveyed globally have either announced or are forecast to announce falling corporate income tax rates in 2016.

Transfer pricing reform

Transfer pricing reform – a key component of the OECD’s October 2015 recommendations – will also be prominent in 2016, with 18 of 38 jurisdictions surveyed (47%) indicating changes in this area that will result in increased tax burden. Changes in tax enforcement approaches, meanwhile, are forecast to increase the overall tax burden in 14 of the 38 countries (37%) in the year ahead.

Three other topics were discussed at the Forum, including elevating the perception and performance of in-house tax functions; the tax considerations for mergers and acquisitions when investing into ASEAN; and the disruptive forces of the future that can impact business and its tax function.

Chung-Sim Siew Moon, Singapore Head of Tax, Ernst & Young Solutions LLP says: “The holding of the inaugural EY Asean Tax Forum in Singapore reflects the country’s position as a gateway to making investments into the rest of ASEAN. In addition, the Forum supports Singapore’s pursuit as a leading center for taxation and regional tax knowledge hub.”


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