Business leaders have much more clarity about cross-border tax planning issues, including the impact of potential reforms to transfer pricing than a year ago, and are implementing new processes to work within the rules, according to research from Grant Thornton.
According to GT’s International Business Report (IBR) businesses worldwide are reporting greater certainty around transfer pricing. In the most recent study, over half (53%) of business leaders said they welcomed the move towards more global co-operation and guidance from tax authorities on what is acceptable tax planning, even if this provided less opportunity to reduce tax liabilities across borders. This compares with last year's survey which found that only 38% of respondents were supportive of the proposed changes.
Francesca Lagerberg, GT’s global leader for tax services, said: ‘It is almost a year since the level of corporation tax multinationals like Amazon, Apple, Google and Starbucks are paying hit the headlines. At that time, around two-thirds of business leaders were calling for clarity around the operation of specific tax rules, but twelve months on this has now dropped to just half.’
Lagerberg attributed much of the change to the actions taken by global leaders in response to public criticism of the tax practice in multinationals.
‘A number of exercises are underway to establish greater transparency and clarity; for example, the OECD has been given a mandate by the G20 economies to prevent tax base erosion and profit shifting (BEPS) through reform at the global level,’ Lagerberg said.
The IBR also found that the majority of businesses leaders (64%) do not feel their country's tax laws and policies tax the correct people at the correct levels. In addition, half (54%) do not feel that their tax system encourages compliance.
Lagerberg said: ‘The results show there is a long way to go before business leaders feel truly comfortable with the tax planning guidance on offer. But I think the smartest business leaders have gone away, taken advice and properly insulated themselves against any negative impact on their brand. This makes sense: it would be a mistake to think of the tax avoidance issue as over; to see it merely as a 2013 phenomenon. There is still a spark there and a need remains for global clarification or this issue could boil over again.’
The IBR asked business leaders for their strategic priorities in 2014. While a third (35%) cited reducing their tax bill, this issue ranked tenth out of thirteen, well behind increasing productivity (70%), increasing market share (65%) and cutting costs (64%).
