Three quarters of business leaders would pay more taxes in exchange for greater clarity from authorities on what is acceptable for tax planning, according to the Grant Thornton International Business Report (IBR), a global survey of 2,580 businesses in 35 economies. And while few expect a global agreement any time soon, the majority would like to see their governments take unilateral action to help achieve this aim.
The ball is very firmly in the tax authorities’ court
Francesca Lagerberg, global leader for tax services at Grant Thornton said: “The levels of taxation paid by businesses has become a very public and emotive issue. But setting emotion to one side, businesses have a responsibility to their investors and shareholders to keep costs down – within the existing regulatory parameters.”
Nevertheless, the IBR demonstrates that 73% of Canadian respondents, like their counterparts in the rest of the world (74%), share the same need for clarity from the tax authorities, even if it means less opportunity to reduce their cross-border tax burden. In response to the same question asked the previous year, only 46% of Canadian respondents were favourable towards such measures. Results reveal that changes are expected in the complex area of cross-border tax transactions.
Unilateral vs multilateral
Business leaders doubt that a global agreement will be enacted to provide clearer tax rules for all. Just 23% of the survey respondents thought that the OECD’s plans for global tax improvement under the Base Erosion and Profit Shifting project (BEPS) would likely be implemented. In Canada, this proportion shrinks to 16%. It should be noted that the OECD will publish its definitive recommendations on the BEPS project by late 2015.
However, they are far more supportive of implementing unilateral, individual country actions in lieu of a global agreement: 71% said they would support their own government taking unilateral action to combat the loss of tax revenue in their jurisdiction. Support for local action is strongest in India (95%), the US (82%) and the UK (79%). In Canada, 71% of respondents are in favour of such actions.
“The IBR clearly shows that businesses remain skeptical about the adoption of the OECD recommendations under the BEPS. As the OECD does not have force of law, each member country will need to adopt the recommendations within its own legislative framework, a process that could be very long. This is why the majority of respondents support unilateral action by tax authorities as it will protect the tax base”, said Daniel Marion, Transfer Pricing and International Tax Partner at Raymond Chabot Grant Thornton.
Francesca Lagerberg continued: “[…] the work being undertaken by the OECD on tax planning should go some way to allaying business concerns by moving this debate away from talk to action. The OECD is set to finalise its recommendations this year. International tax standards clearly need to be stripped down and rebuilt for the world we live in today. The existing legislation is creaking at the seams in an increasingly interconnected, digital world in which the definition of a ‘border’ is looking archaic. The research is showing that businesses are asking for more help to enable them to navigate the new challenges of a digital economy.”
For an interview with Daniel Marion, Transfer Pricing and International Tax Partner, please contact Sarah Ouannou (see below).
Notes to editors
The Grant Thornton International Business Report (IBR) provides insight into the views and expectations of more than 10,000 businesses per year across 35 economies. This unique survey draws upon 22 years of trend data for most European participants and 11 years for many non-European economies. More information: www.grantthornton.global
Questionnaires are translated into local languages with each participating country having the option to ask a small number of country specific questions in addition to the core questionnaire. Fieldwork is undertaken on a quarterly basis, primarily by telephone. IBR is a survey of both listed and privately held businesses. The data for this release are drawn from interviews with 2,580 chief executive officers, managing directors, chairmen or other senior executives from all industry sectors conducted in May 2015.
About Grant Thornton
Grant Thornton is one of the world’s leading organizations of independent assurance, tax and advisory firms. These firms help dynamic organizations unlock their potential for growth by providing meaningful, forward-looking advice. Proactive teams, led by approachable partners in these firms, use insights, experience and instinct to understand complex issues for privately owned, publicly listed and public sector clients and help them find solutions. More than 35,000 Grant Thornton people, across over 100 countries, are focused on making a difference with clients, colleagues and the communities in which they live and work.
About Raymond Chabot Grant Thornton
Founded in 1948, Raymond Chabot Grant Thornton (rcgt.com) has become a Canadian leader in the fields of assurance, tax, consulting services, and business recovery & reorganization. Its strength is based on a team of over 2,500 professionals, including some 230 partners. Together, Raymond Chabot Grant Thornton and Grant Thornton LLP, another Canadian member firm of Grant Thornton International Ltd, help dynamic Canadian organizations unlock their potential for growth with over 4,300 professionals and some 140 offices across Canada. Grant Thornton International Ltd provides clients with the expertise of member and correspondent firms in more than 130 countries, with over 40,000 professionals.
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