G20 Foundation Publications Australia 2014 - Page 16

A global tax [r]Evolution The changing world of tax Albert Baker, FCPA, FCA Deloitte Global Leader Tax Policy Recent years have witnessed considerable public anger over apparently low tax bills paid by certain companies. As a result the OECD plan was drawn up to tackle this perceived tax avoidance by multinationals (Base Erosion and Profit Shifting (“BEPS”)). Existing principles of international taxation were designed before the globalization of business and the digital economy. Policy makers are now recognizing these wider issues, and recognize that maintaining the status quo is not an option. Tax is no longer something limited to business and tax authority relationships—it has become a significant strategic business issue, and there are also growing demands for tax information from many non-traditional sources. The issue of tax transparency continues to be part of the global political and media agenda. It is too early to assess the impact of all the changes in the marketplace; however it is highly likely that most multinationals will be affected. Identifying risks and opportunities that current developments bring is critical and requires regular monitoring and review of an organization’s position and options. As the strategic goals and operations of a business change over time, so should the tax strategies adopted to support them. As part of this global tax [r]Evolution, there is a perception multinational businesses are not paying their fair share of taxes. Responsible tax (e.g. reputational risk) is now an important component of international tax matters. There are three components to this [r]Evolution: the administration of tax laws and treaties by jurisdictions (we see a growing number of instances of potential double tax where more than one country is seeking to tax the same income); unilateral tax law and treaty changes (we see a growing list of countries that are enacting or proposing uncoordinated legislative changes to protect their tax base, which can lead to double tax situations); and the OECD BEPS project. A survey The purpose of Deloitte’s “Base Erosion and Profit Shifting (BEPS) & Responsible Tax survey,” completed in March 2014, was to gauge contacts’ views regarding the increased media, political and activist group interest in “responsible tax” and BEPS, and the resulting impact on their organizations. Nearly 600 Deloitte contacts responded to the survey. Tax has become a significant strategic business issue. It can impact an organization’s competitiveness but can also impact an organization’s brand and its broader approach to corporate social responsibility. Ninety-three percent of survey respondents agreed or strongly agreed that there has been an increased media and political interest in tax in their country. Overall, 74% agreed or strongly agreed that their organization is concerned about the increased media, political and activist group interest in tax and 60% have received questions from their C-Suite and/or Board of Directors about the increased interest. Challenges and aspirations Companies need the certainty of conducting tax affairs based on laws that are clear and reduce the risk for tax disputes. This is a rare opportunity for governments to achieve this on a multi-lateral basis and in the spirit of cooperation. Of course, society should not underestimate the challenge of this given that at least on a short term basis it is unlikely that all governments will see the same proportionate increases or decreases in corporate tax revenues as a result of the BEPS initiative. Adding to the complexity is that, even in a post-BEPS world, governments can be expected to continue to provide economic and tax incentives in their domestic laws. Many of these incentives are designed to encourage investment and increase employment. Also, governments want to ensure that the tax rules applicable to their headquartered companies do not put those companies at a competitive disadvantage relative to their foreign peers. Tax has become a significant strategic business issue. It can impact an organization’s competitiveness but can also impact an organization’s brand and its broader approach to corporate social responsibility. The global landscape of BEPS, unilateral action by countries and increased international tax audits, is resulting in in a global tax [r]Evolution. As such, it needs to be managed strategically. Deloitte will continue to contribute to this process, including continuing to discuss with and make submissions to the OECD, as well as continuing the discussion in global and domestic forums. In our submissions Deloitte strives to represent the range of businesses we provide services to and the aim is to shape legislation in a practical and sustainable way. We will also continue to advise clients and contacts on developments. We recommend that multinationals assess the potential impact of the OECD’s recommendations on their business. Information and contacts For further information, please visit the BEPS page on Deloitte.com or contact Albert Baker, Deloitte Global Leader—Tax Policy. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see www.deloitte.com/about for a more detailed description of DTTL and its member firms. Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning ձѥɥ̸]Ѡ䁍ѕݽɬȁɵ́)ɔѡչɥ́ѕɥѽɥ̰єɥ́ݽɱ́ѥ́Յ͕٥Ѽ̰ٕɥѡͥ́ѡ䁹Ѽɕ́ѡȁЁͥ)̸їéɔѡɽͥ́ɔѕѼѡхɐፕ)Q́չѥх́Ʌɵѥ䰁єQՍQԁ1ѕ́ȁɵ̰ȁѡȁɕѕѥѥ̀ѥٕ䰁ѡqєݽɯt̰)́ѡ́չѥɕɥɽͥ٥ȁ͕٥̸9ѥ䁥ѡєݽɬ͡ɕͥȁ䁱́ݡͽٕȁх䁅ͽݡɕ́)ѡ́չѥ+ иȁɵѥхЁєQՍQԁ1ѕ