Business leaders renew appeal for clarity on 'acceptable' tax planning
Three quarters of business leaders would pay more taxes in exchange for greater clarity from authorities on what is acceptable, 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.
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."
"Despite this, our IBR survey clearly shows that the vast majority would actually support paying more in tax in exchange for clearer guidance from tax authorities on what is acceptable tax planning. The ball is very firmly in their court to provide the clear lines that businesses are requesting. The results provide more evidence that clarity is needed in the complex world of cross border tax transactions."
When asked if they would welcome more global co-operation and guidance from tax authorities on what is acceptable and unacceptable tax planning, even if this provided less opportunity to reduce tax liabilities across borders, 75% of business leaders said 'Yes', up from 53% one year earlier.
In the G7, 75% want greater clarity, up from 43% one year earlier. Notable countries were India (95%), South Africa (94%, up from 64%) the UK (83% up from 59%) and US (83%, up from 37%).
Unilateral vs multilateral
Business leaders are not hopeful 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 on global tax improvement under the Base Erosion and Profit Shifting project (BEPS) would be successfully implemented. This is slightly down from 24% one year earlier.
However, they are far more supportive of unilateral, individual country, action 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%), UK (79%), China (67%) and Ireland (64%).
Francesca Lagerberg continued: "Businesses may be pessimistic on the chances of a global agreement - the Doha Round and climate change negotiations have taught us that these things take time. However, 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.”