Survey sees countries witness significant increases in tax scrutiny

Taxation is increasingly becoming a pivotal determinant in election campaigns, and with 10 of the 32 countries planning national or presidential elections in 2015, businesses must prepare now for possible changes in national tax policies. This will result in a rising tax burden and enforcement measures.

These are the findings of the recent report “outlook for global tax policy in 2015,” which draws on the views of EY tax policy leaders in 32 countries to identify key tax trends for the year ahead in each of their regions.

Falling oil prices and currency fluctuations also are identified as key drivers for national policy revision in what has now turned out to be an eventful year ahead.

Nigeria is no doubt among countries that are currently facing similar situations – elections and declining oil prices.

Accordingly, to the report, 40 per cent of countries are making tax reforms before Base Erosion and Profit Shifting (BEPS) recommendations have been finalised; 31 per cent of countries report significant increases in tax scrutiny in 2015, and nearly a third expect the corporate income tax burden to increase in 2015.

Country data also show that the trend toward broad-base, low-rate business tax regimes continues to prevail. Conversely, however, nearly a third of respondents (31%) expect the overall corporate income tax burden in their countries to increase in 2015. This further supports OECD data that show total tax revenues are rising throughout the world.

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As policymakers anticipate further BEPS developments in 2015 — including the announcement of Action 12, “Requiring Taxpayers to Disclose Their Aggressive Tax Planning Arrangements” — the trend for taxpayer scrutiny is also set to accelerate.

The report highlights how governments are already launching new transparency requirements such as country-by-country reporting, with 10 countries (31%) reporting increases in tax enforcement measures for the year ahead.

Many countries are pressing ahead and legislating now, rather than waiting for final recommendations from the Organisation for Economic Co-operation and Development (OECD) on its Base Erosion and Profit Shifting.

Chris Sanger, EY’s global tax policy leader, says: “Tax is at the focal point of the global policy agenda more than ever before. With the acceleration of initiatives such as the BEPS Project, policymakers are choosing to react now and adapt later, rather than waiting for recommendations. This has been described as ‘bizarre’ by members of the OECD and adds to increasing tax uncertainties facing businesses in 2015.

“Businesses need to develop robust processes and policies to achieve certainty. By studying the drivers of policy change and understanding which countries are adopting new policies, they can gain a clearer picture of where the tax agenda is moving next.

“In these times of change, it is even more important than the impact of the options facing policymakers on business investment is readily understood. This means that, despite the ever-increasing demands on tax directors, a key part of their role is to act as ta diplomats. Only through this dialogue can the tax system contribute to a better working world.”

Iheanyi Nwachukwu