At a global tax conference for multinational companies, held in Paris by Taxand, an independent global organisation of specialist tax advisors, multinationals and tax advisors discussed their top concerns, experiences and strategies in a rapidly changing tax environment.
Multinational clients spoke of how they are seeing a rise in scrutiny around the integrity and accuracy of their financial statements from authorities. Standing up to that scrutiny is a challenge for tax departments around the world as historically passive authorities start showing a clear tone of aggressiveness. However, tax authorities are showing their cards earlier in the process, under pressure from governments in need of revenue and willing to settle tax disputes rapidly to generate cash.
Another major concern is a lack of understanding from the wider public about where businesses are paying taxes in the context of which markets generate profit. Some people do not comprehend that a business may not be profitable in the country where they are head quartered, but are paying significant taxes in the other jurisdictions in which they operate.
Multinationals also spoke publically about their worries over the growing trend towards subjective interpretations of the tax laws in countries such as the UK, US and Spain. These ‘grey’ areas of tax legislation increase the burden on tax departments, as they are left to guess at what the stance of the authorities will be, fuelling a growing sense of unease and leading to a more defensive response from businesses.
It is clear that companies across the globe are feeling the pain of more and more tax audits, although the nature of scrutiny from the tax authorities varies from country to country. Some are focused on compliance, while others are demanding a high level discussion around the overall tax strategy across borders. Relationships with tax authorities appear to have improved overall, but there is also clear variation depending on the size of the business and sector in which it operates.
Multinationals are clearly embracing technology. New tax systems, giving up to date overviews of tax across a group, are becoming more and more common. As authorities look to digital filing as the next step in closer understanding of multinationals’ tax exposures it is imperative that a close dialogue continues between all parties. This will ensure that ultimately these new systems are beneficial for all and achieve a commonality across as many markets as possible.
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