Kreston Global | The interpreneur report | Global tax
Kreston Global
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African and American business leaders feel the most confident globally in tackling international tax
When moving into new territories, businesses must navigate new tax rules that differ not only from the rules interpreneurs are used to in their home country, but also become more complex due to the cross-border, multi-jurisdictional nature of their commercial operations.
In addition, global regulations are becoming stricter and more joined up as policymakers look to eliminate tax gaps and mismatches between different countries’ regimes and beef up compliance. To date, more than 140 countries have signed up to the OECD/G20 Inclusive Framework on Base Erosion Profit Shifting (BEPS) 9, marking a significant step forward in international cooperation to stamp out tax planning strategies that aim to shift profits into lower tax jurisdictions to avoid tax.
While the aim is to make global tax more cohesive and transparent, this could bring in a new layer of requirements and complexity for businesses. Business leaders may well require specific support from experts on the ground to help them comply, especially when entering a new market.
Nonetheless, respondents to our survey don’t feel that tax will hold them back and believe they are well-versed in global tax rules and their implications for multinational businesses. Indeed, 40% said they are extremely confident that they understand global tax rules that govern multinational businesses – rising to 64% in the US, 56% in Egypt, 53% in South Africa and 49% in Nigeria. Japan (9%), Spain (23%), and France (26%) were far less bullish on this front.
A further 53% are confident they have a good grasp of key principles and can navigate common scenarios, although they may need to seek external guidance for complex situations.
Only 8% are not very confident or not confident at all, with those in Japan, France and Germany evincing the least confidence in this area.
Whether this confidence is reflected in their company’s execution of tax affairs is a moot point, especially since the ‘tax gap’ (i.e., the difference between the tax due and the tax paid) remains a persistent problem. The OECD estimates that around $240 billion is lost each year to tax avoidance by multinationals.10 However, it seems likely that with further tightening of tax laws on the horizon, specialist support and expertise are likely to be required at some level by many organisations.
Business leaders will valiantly seek to stay ahead of the game on tax but may struggle to keep up with the implications and intricacies of the global tax crackdown that the OECD continues to spearhead. Cross-border transactions can be extremely complex from a tax perspective, and with significant changes on the way over the next couple of years, the global tax landscape is set to alter radically. Planning and compliance will become even more challenging for businesses of all sizes. SMEs are either going to have to invest in recruiting more tax experts in-house or get fast, effective advice from outside advisers.
Mark Taylor, Chair of Kreston Global Tax Group and Tax Director at Duncan and Toplis