Tax Execs Growing Concerned over Transfer Pricing

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While keeping up with legislation and regulations remains the top risk facing corporate tax directors, global transfer pricing is quickly becoming a more serious concern for them, according to a recent survey

The survey, announced at Ernst & Young’s 32nd Annual International Tax Conference, explores the combination of external pressures and internal corporate plans for growth that international tax and finance executives are managing. Participants included over 300 senior tax executives from large public and private companies across 20 countries. Just over three quarters of the respondents were from companies headquartered in the U.S.

“Externally, gradually stabilizing economies are helping finance leaders and tax executives refocus, rebuild and face uncertainties elsewhere, such as the prospect of U.S. tax reform and more stringent international tax policy,” said Kate Barton, EY Americas vice chair of tax services. “Internally, their companies are changing, too, combining a returned focus on growth and investment with reorganizations and transformations. These executives are continually challenged to find success under pressure, even as the source of pressure evolves.”

Environmental risks continue to grow. Though U.S. legislation and regulation still tops the list of greatest corporate tax risks, it was selected by just 40 percent of respondents, down from 60 percent in 2011. Meanwhile, respondents increasingly focus on the second most significant risk, global transfer pricing, cited by 24 percent (up from 16 percent in 2012). Since 2011, the major corporate tax risk has been shifting from the impact of U.S. tax policy changes to global transfer pricing.

Expectations that fundamental international tax reform is imminent in the U.S. also ebbed as the improved economy and political process ease the urgency. Last year, 68 percent of survey participants expected tax reform to occur, but 12 months later, only 55 percent predict reform.

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