An annual global survey of multinational chief financial officers (CFOs) conducted by Taxand has shown that publicising of tax practices continues to be a major issue for multinationals with 77 percent of respondents saying it has a detrimental impact on reputation.
Taxand is the world’s largest global organisation of tax advisors to multinational businesses. According to Taxand Global Survey, 2014 saw a substantial step-up in international scrutiny on multinationals’ tax planning activity and not just through global initiatives such as Base Erosion and Profit Shifting (BEPS), but across international organisations and individual countries alike.
Multinationals have increasingly found themselves thrust into the limelight, be it in relation to corporate inversions or for having ‘sweetheart’ deals with tax authorities.
As shown by the survey, the growing impetus for tax reform and scrutiny is having significant implications for multinationals.
The Taxand Global Survey was conducted among multinational clients and produced the following key findings: Reputation under fire – multinationals stuck in a ‘lose, lose’ situation; 77 percent say that exposure to the public of corporate tax planning has a detrimental impact on reputation; 63 percent say the regular political discussion around potential new tax measures is causing confusion and uncertainty among business decision makers – politics and public opinion are shaping the future of multinationals; 60 percent have seen an increase in the number of audits undertaken by tax authorities in the past year, and 40 percent say increasing tax scrutiny has made them change their corporate growth strategy in particular countries.
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In terms of the methodology, Taxand handpicked a selection of truly multinational CFOs who represented businesses that generated revenues of more than $1 billion across the Americas, Europe and Asia.
Also, 80 percent say tax initiatives to fundamentally reform international tax architecture are desirable; 83 percent think increasing global tax transparency will increase the cost of compliance; cross-border taxation issues continue to trouble multinationals: transfer pricing seen as having the most significant increase in scrutiny over the past year; 68 percent of respondents feel the increasing trend of corporate inversions will lead to increased competition between tax regimes; 83 percent feel tax competition will increase over next five years and 76 percent think BEPS will make countries more competitive from a corporate tax rate perspective; 67 percent say that tax issues are on their Board agenda to a great extent or to some extent.
Frederic Donnedieu, chairman of Taxand, said: “We are in an interesting environment at present where, while increasing competition between countries to attract investment is driving lower corporate tax rates, political leaders also remain anxious to maintain revenues. Often viewed as a popular target, this has culminated in the public naming and shaming of certain multinationals despite them remaining on the right side of the law.
“Our annual survey demonstrates that multinationals feel caught in the crossfire, as they prepare for the post-BEPS world. Companies have changed their corporate growth strategies due to increasing scrutiny and over half have seen an increase in tax audits instigated by tax authorities in the past year. The survey also supports that tax authorities have continued to hone in on cross-border taxation issues such as transfer pricing and inversions.
“As governments and politicians continue to, very publicly, shake up tax reform, multinationals remain an easy target. With this in mind, it has never been more important for multinationals to be confident in their tax planning and to demonstrate that their activities are founded on commercial and business substance.”
Iheanyi Nwachukwu
