Enterprises are expecting that tax risks are likely to increase more in the coming years, according to a survey of tax and finance executives in twenty five countries by the advisory firm Ernst and Young. The survey looked at the views of companies worldwide in respect of the OECD base erosion and profit shifting (BEPS) project and other tax risks faced by multinational enterprises.
The enterprises surveyed are anticipating that although coordinated action by states against tax avoidance is likely to be limited there is on the other hand likely to be a greater effort by individual countries to strengthen the provisions of their international tax law. The majority of the largest companies therefore anticipate that the risk of double taxation is likely to increase within a few years. The launch of the BEPS action plan has already caused some countries to take action to strengthen their tax enforcement.
Other sources of tax risk are seen to include uncertainty about tax legislation and regulations; greater complexity in managing the group tax rate’ increasing complexity of supply chains; more aggressive tax audits in the US and increased focus on tax transparency requirements and cross-border transactions. Also, it is reportedly becoming more difficult for these companies to secure advance pricing agreements as at least one of the tax authorities involved in the process with raise difficulties or challenges for the applicant.
Most of the world’s largest companies therefore predict that issues around tax risk and management of tax controversy will become more important. They also consider however that they do not have adequate resources to deal with their tax function.