Chief financial officers from multinational companies are suffering from increasingly confusing messages around tax legislation by regulators and governments worldwide, according to a global survey by Taxand.
Majority or 74% of respondents said that regular political discussion around potential new tax measures is causing uncertainty amongst business decision makers.
Political leaders have spoken at length about the taxation of multinationals, proposing sweeping change on a national and international level, from the OECD’s initiative around Base Erosion and Profit Shifting (BEPS) to retrospective tax litigation charges in parts of Asia.
Seventy-three percent 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.
Hindering global recovery
"This uncertainty around tax is damaging multinationals’ confidence to invest and subsequently hindering the global recovery," says Frédéric Donnedieu de Vabres, Chairman of Taxand.
The study also reveals that a majority or 76% of survey respondents said that the exposure in the media of corporate tax planning activity has a detrimental impact on a company’s reputation.
The survey shows that tax authorities have focused on the issues of substance and transfer pricing reforms in the last year.
Thirty-one percent said that the intense media focus on tax planning had made them change their approach to tax planning substance.
Twenty percent respondents, the biggest proportion of responses by some margin, confirmed transfer pricing as the most challenging aspect of global taxation.
Asked about 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, and 78% have reported a rise in compliance costs over the past year.
Tax remains high on board agendas
Seventy percent 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
Co-operation with other authorities around the world through data sharing and agreements, and the frequency of audits have also 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.”