Taxand, a global organisation of tax advisors to multinational businesses, reveals that multinationals are facing larger tax bills coupled with a sizeable increase in regulation, further to tax changes introduced by governments in 2010.
The Taxand 2010 Tax Milestone Survey shows that the vast majority of measures and policies introduced by governments and tax authorities across the globe over the last year will penalise multinationals by applying greater scrutiny on tax driven activities and structures and by increasing the number of taxes to be collected in 2011 and beyond.
Examples of measures introduced which will have a negative impact on multinationals include an increase in the VAT rate, to be imposed by six countries from 2010 onwards, and an increase/expansion of VAT on certain goods in two further countries.
In Spain, there is a new Code of Good Tax Practice along with an increase in tax inspections and anti abuse measures. Over in Ireland, Thailand and Austria, there is the abolition of exemptions/tax allowances.
Others include an environment tax in Thailand, tax on financial transactions in Venezuela, and a City Maintenance Tax for foreign enterprises in China.
In the U.S., the Internal Revenue Service is requiring corporations, including multinationals, with US$10 million or more in assets, to identify uncertain tax positions for the next five years (this previously applied to corporations with $100 million or more in assets).
Examples of measures introduced which will have a positive impact on multinationals, encouraging global expansion and investment include a reduction in the corporate income tax rate, to be introduced in five countries from 2011, and the relaxation of CFC (Controlled Foreign Company) rules in the UK alongside Foreign Branch Reform, an elective regime to exempt tax of foreign branches. In Malaysia, there are incentives for oil and gas companies operating there.
“Governments are clearly looking to claw back lost revenue by imposing a raft of newly introduced or revoked taxes on the corporate sector. Governments are abolishing existing exemptions, bringing in new taxes or introducing new requirements affecting tax structures in order to obtain more funds from multinationals operating in their jurisdictions,” says Frédéric Donnedieu de Vabres, Chairman of Taxand.
The US, China, Spain, Austria, India, Thailand, Romania and Turkey are particularly notable within the survey as countries whose authorities have introduced measures designed to apply more scrutiny on multinationals’ tax driven activities and who are going down the route of collecting more taxes from multinationals.
The UK, Canada and Malaysia are among the few countries which stand out as regions where favourable tax policies have been introduced to stimulate economic recovery and in particular investment by multinationals.
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