The tax contribution of multinational companies (MNCs) to local economies around the globe has become extremely politically charged, with the focus shifting from ‘fiscal’ to ‘moral’ responsibility, delegates at a global conference have been told.
The New York conference, hosted by specialist tax advisor Taxand, included discussions on what have been dubbed the ‘immoral tax practices’ of MNCs and on the increasing ferocity with which the tax authorities are challenging strategic tax initiatives.
“The on-going debate into multinational tax planning is showing few signs of subsiding,” noted Frédéric Donnedieu de Vabres, chairman of Taxand. “Media focus remains high and governments and the general public continue to deem tax planning as ‘immoral’. This has led some people to believe that any sort of supply chain planning is now a thing of the past, particularly given the tarnishing of certain corporate reputations that has already taken place.
“However, there is a careful line to be trodden here. These waves of attack on any supply chain planning could potentially backfire, by curtailing investment, thwarting growth and compressing innovation across the globe.
“In a global economic environment as fluid as it is at present, bona fide commercial business restructuring should be endorsed and even embraced, as a means of navigating the stagnant business landscape. The roles of finance and tax departments are in fact to contribute to shareholder value, alongside the need to manage their tax responsibilities across a number of jurisdictions.
Donnedieu de Vabres also noted that tax planning has hit the headlines over the past year, presenting an additional level of risk for MNCs given the increasing ferocity with which the tax authorities are challenging strategic initiatives.
“As a result, we have seen a rise in the number of challenges from the authorities, coupled with an increase in the technical ferocity with which they are carried out,” he commented. “In a relatively short space of time, the range of issues that are called into question during tax audits has grown exponentially, leaving MNCs battling against an ever changing tide of compliance and assessment.
“Tax authorities have re-doubled efforts, on a risk assessed basis, to focus in on activity that is most likely to bring tangible results. The ways in which these challenges are carried out are also constantly evolving, and MNCs can no longer afford to simply keep abreast of current legislation, but need to anticipate future changes to continue meeting their business’s commercial objectives and remain fully compliant.
“This increasingly aggressive approach points to the need for tax risk management to be embedded into corporate governance at board level in order to protect shareholder value. For MNCs, a careful balance of central and local tax management is essential so that local compliance fits into an over-arching strategy for the group as a whole.”
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