Key conference message

Over the last year, corporate taxes continue to be thrust into the limelight by governments and the media alike. Multinationals face inconsistency between global prose and national policy, forcing them into an opaque world of truly rapid change, which has made business planning a key corporate challenge.

Key conference pointers

• As Asian markets react to international developments, future tax policy trends across the region are likely to reflect those seen in Western societies. A greater emphasis on tax audits and participation in global tax information networks confirms that authorities have set higher tax revenue targets and are reaping the rewards of greater scrutiny of company tax structures and tax liabilities. Prepare for ever greater transparency in the future. Develop your strategy with a global outlook from resources, processes and systems to risk management, controversy and legislative changes.

• BEPS is the first international tax reform to cut across both OECD and non-OECD countries and is set to make a significant change to the way in which the international tax system operates. By 2020, we still expect a healthy level of tax competition between countries, but with fewer hybrid structures, a greater emphasis on substance, and a lesser number of jurisdictions involved in company structures. Tax planning needs to be integral to your commercial decision making. Don’t wait to see how BEPS will impact your business – proactively adapt your strategy to ensure you are prepared.

• Transfer pricing application differs widely across East and West, causing uncertainty around what the future will hold for multinationals. To get to a “win win” situation with multinationals, tax authorities need to take a more flexible approach regarding fair allocation of profits and reasonable compliance requirements. Review your global approach, establish security on BEPS and ensure your global data is in order in preparation for further scrutiny.

• With global M&A activity levels increasing there comes a new shape to the geographies, structures and complexity associated with the latest global deals.  Media sentiment would imply the level of corporate taxation is one of the key tax considerations in M&A. However, assessing the decision on the tax rate alone is too simplistic an approach and as new countries increase their global presence in the M&A market, other factors such as substance, tax treaty networks and simplicity of legal systems should be considered. Tax strategies need to be aligned with the business to maximise opportunities and manage risk. Revisit your debt and capital structure, and undertake qualitative analysis re substance.
• As governments aggressively try to fill budget deficits, tax litigation action against multinationals has been on the rise. However, multinationals are increasingly seeking to reach settlement outside the courts through arbitrations and conciliations. As a result, the exchange of information across jurisdictions and wide adoption of best practice recommendations following the publication of the OECD’s guidelines on BEPS will play a crucial role going forward. Multinationals should consider their route to resolution carefully, ensuring robust documentation and with the expectation of more international collaboration.
• There are 150 countries with VAT and GST across the globe at present, but changes in this area are particularly prevalent across Asia as governments see indirect taxation as the easiest route to revenue.  By 2020 it’s expected that more than 200 countries will have a VAT system in place, with an average rate of 18-20%.  With indirect tax moving so quickly in Asia, international coordination of VAT and GST systems is required to avoid the risk of double taxation. Multinationals need to ensure they have a strong global in-house team, sophisticated IT tools and secure frameworks, as well as collaborate with the OECD to mitigate risk.
• Chinese outbound investment into real estate increased to US$8.3 billion in 2013 with the UK and USA commercial real estate markets being the biggest targets for investment. Looking forward to 2020, China’s outbound investment into real estate is set to continue to rise though a decline in the use of traditional tax strategies like indirect sales is likely, with a growing dominance of structures such as REITs. Investors need to put in place simple yet robust structures from both a legal and tax perspective. Include ETR early, and consider tax increases and worst case market scenarios when planning to invest.
• China’s tax regime is embarking on a journey of immense change with a raft of reforms, treaties and international tax regime cooperation making it an ever more important player in the international tax regime. Working with the OECD and other institutions, China will further absorb internationally accepted tax principles and rules into its national tax legislation resulting in enhanced tax administration efficiency, fairer allocation of fiscal resources and stabilised taxpayer burden. Leverage local expertise to communicate with authorities, reassess your structure and explore industry and regional tax planning opportunities.