A majority of multinational company tax executives predict that a broadened international regulatory focus on increased transparency will be the most significant change their company can expect in international taxation over the next year, according to a survey by KPMG LLP.
Polled about the tax challenges their organizations face in the global business arena, the 100 tax executive survey respondents also revealed they expect an increased volume of tax examinations to continue around the world, given the recession and government budget deficits.
The survey was conducted in connection with KPMG’s annual International Tax Conference in March.
“Our findings further confirm that corporate tax executives are feeling pressured by the increased compliance requirements and regulatory oversight globally, and they don’t see a respite in sight soon,” said Rodney Lawrence, tax principal in charge of KPMG’s International Corporate Services practice. “They also tell us frequently that finding the support and resources within their organizations to manage these increased demands is difficult in an environment where doing more with less is now the norm.”
Some 56 percent of survey respondents cited a broadened international approach to increased transparency on tax risk as the area that they expect would change the most over the next 12 months. One example of this new approach is the U.S. Internal Revenue Service’s recently revised approach to disclosing uncertain tax positions.
Ranking second was changes to the taxation of intangible property to or from the United States, cited by 38 percent of those polled.
On the topic of how they see tax risk changing in their organizations in the next year, 54 percent said they expected an increased volume of tax examinations around the globe, while 37 percent expect tax laws and administrative practices to continue to revise what had historically been acceptable corporate tax-planning initiatives.
When asked where they would most likely make an investment, if additional funds became available for their tax department over the next 12 months, more than half (51 percent) of those polled said they would invest in personnel resources, with 27 percent saying their investments would be outside of the United States and 24 percent saying inside the United States.
Of the tax proposals that have been floated publicly or addressed in President Obama’s 2012 budget, almost one-third of respondents (31 percent) said that the prospect of expanding U.S. taxable income to include income earned overseas combined with disallowing related expenses would have the most dramatic effect on their companies’ effective tax rate.
Repatriation, capital redeployment (including leverage) or hedging were the aspects of tax planning that would be most affected by the FY2012 U.S. budget proposals, according to 33 percent of respondents. A majority of companies (32 percent) expect to devote increased tax resources to Asia, followed by Europe (18 percent), North America (15 percent) and Latin America (12 percent).
Transfer pricing remains a priority of many tax authorities around the world, with the United States clearly the leader in transfer pricing enforcement, according to more than 60 percent of respondents.
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