The drive by governments around the world to collect taxes from corporations as they attempt to close yawning budget deficits has sparked a rise in the number of tax authority audits of multinationals, research shows.
A survey by Taxand, a network of global tax professionals, found 82 per cent of multinational companies saw a rise in the number of government audits they were subject to, and 84 per cent said that as a result they had experienced a rise in compliance costs.
The survey interviewed the chief financial officer or tax director at 52 multinational companies.
It found the single most challenging area for multinationals was transfer pricing – the price a multinational charges one part of its business for goods or services produced by another – and that this area was coming under most scrutiny from tax authorities.
“At the heart of this is the perception that multinationals may manipulate their transfer pricing strategies to create a significant tax advantage,” said Antoine Glaize, a specialist in transfer pricing at Taxand.
Somewhat surprisingly, the study found the majority of those surveyed - 74 per cent - believe global tax harmonisation is desirable, with 73 per cent saying that in Europe it was possible.
“The high percentage of respondents who felt that tax harmonisation is desirable is surprising when considering many multinationals seek ways in which to minimise their tax exposure by investing in countries with favourable treaties and rates,” said Nicloas Jacquot, head of Taxand France.
The survey also found most companies described their relations with local tax authorities as “improving” over the past year, with countries in Europe and Asia doing so by large margins. However, in the US only a minority – 37 per cent – reported improving relations.
Taxand said that guidelines developed by the Organisation for Economic Co-operation and Development through its Model Tax Convention were likely to have helped smooth relations between business and tax authorities worldwide.
Source: http://www.ft.com
A survey by Taxand, a network of global tax professionals, found 82 per cent of multinational companies saw a rise in the number of government audits they were subject to, and 84 per cent said that as a result they had experienced a rise in compliance costs.
The survey interviewed the chief financial officer or tax director at 52 multinational companies.
It found the single most challenging area for multinationals was transfer pricing – the price a multinational charges one part of its business for goods or services produced by another – and that this area was coming under most scrutiny from tax authorities.
“At the heart of this is the perception that multinationals may manipulate their transfer pricing strategies to create a significant tax advantage,” said Antoine Glaize, a specialist in transfer pricing at Taxand.
Somewhat surprisingly, the study found the majority of those surveyed - 74 per cent - believe global tax harmonisation is desirable, with 73 per cent saying that in Europe it was possible.
“The high percentage of respondents who felt that tax harmonisation is desirable is surprising when considering many multinationals seek ways in which to minimise their tax exposure by investing in countries with favourable treaties and rates,” said Nicloas Jacquot, head of Taxand France.
The survey also found most companies described their relations with local tax authorities as “improving” over the past year, with countries in Europe and Asia doing so by large margins. However, in the US only a minority – 37 per cent – reported improving relations.
Taxand said that guidelines developed by the Organisation for Economic Co-operation and Development through its Model Tax Convention were likely to have helped smooth relations between business and tax authorities worldwide.
Source: http://www.ft.com
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