CFOs of multinational corporations have mixed reactions to the Organization of Economic Cooperation and Development’s crackdown on base erosion and profit shifting by global companies, according to a new survey.
The survey, by the tax advisory business Taxand, found that multinational CFOs are split 52 percent (agree) versus 48 percent (disagree) on whether the OECD’s BEPS initiative will create a more sustainable global tax system. The survey also found that whilst 80 percent of the CFOs polled believed tax initiatives to fundamentally reform international tax architecture are desirable, only 55 percent think it is achievable.
The survey was released Thursday as the G20 holds a tax symposium to discuss ways to curb base erosion and profit shifting by multinational corporations.
Following the release of the OECD’s first seven action plan responses last year, the BEPS initiative continues to make headway with public consultation on discussion drafts pushing on at pace, Taxand noted (see
“The OECD’s BEPS Action Plan is designed to revolutionize the taxation of companies across the globe,” said Taxand chairman Frederic Donnedieu in a statement.“It is the most coordinated attempt to redefine the system to reach common objectives—in both developed and developing economies—that we have seen in some time. While many of the action points are still being ironed out for detail, once finalized, countries need to quickly create a stable tax environment that multinationals can have confidence in, by bringing these rules into law swiftly and instructing tax authorities to commit to enforcing the regulations. Multinationals are facing a new frontier where the landscape is uncertain.”
Multinational companies are already seeing the impact of the OECD’s BEPS initiative as government tax authorities become increasingly aggressive in trying to deter tax avoidance and expose the tax strategies of companies through greater transparency and media exposure.
The global initiative will require close international cooperation, transparency, data and reporting requirements from all countries and multinationals. Survey respondents felt that it will have a material financial and operational impact, with 83 percent of the CFOs polled indicating that enhancing global tax transparency will increase the cost of compliance.
Despite the increase in the administrative burden, lack of clarity about who will have access to the information and the potential for misinterpretation of the data, 57 percent of the survey respondents said they were in favor of the OECD proposal for reporting country-by-country profits. However, 83 percent said they believe tax competition will increase over the next five years and 76 percent think the BEPS initiative will make countries more competitive from a corporate tax rate perspective.
Questions also remain on the timeline for implementation of the initiative, along with who holds the authority to implement the BEPS action plan. Taxand found that 52 percent of survey respondents believe that national tax authorities should be given responsibility to enforce BEPS at country level, while 38 percent thought the OECD would a better option.
