Ernst & Young LLP survey finds tax reform and 2012 election take center stage for corporate and tax executives
New York, 2 May 2012 – The upcoming election brings increased focus to the issue of tax reform and its impact on corporate business decisions heading into 2013. According to a survey announced today at Ernst & Young LLP’s Seventh Annual Domestic Tax Conference, 66% of 2,000 tax and finance executives polled said that the presidential candidates are not spending enough time addressing tax issues.
“In the last few weeks, the tone of campaigns has picked up on the need to focus on tax, yet corporate America is still waiting for a focus on critically important aspects of both domestic and international tax treatment,” said Kate Barton, Americas Vice Chair of Tax Services. “Perhaps one reason to avoid the complexity comes from fear of failure. In fact, 72% of respondents believe the issue of tax reform will not be addressed until 2013 to 2014.”
Still, 41% assert that tax reform is beginning to gain traction—25% of whom are actively engaging in the discussion. However, nearly an equal amount (27%) are taking a “wait and see” approach given the belief it has not yet achieved enough footing to warrant action. More than half (54%) agree that legislative (e.g., tax reform) and regulatory (e.g., uncertain tax positions) developments surrounding tax will remain a top area of focus for the CEO, COO, audit committee and board of directors.
When respondents were asked how the U.S. international tax regime would look in five years based on what they are hearing from the candidates and current administration, 34% (up from 17% last year) anticipate a lower corporate tax rate and a move to a territorial system, while 36% foresee a lower corporate tax rate within a worldwide system. Still, 26% felt the status quo will remain, with the same tax rates and the same worldwide system.
When asked how often the tax department meets with the C-suite, audit committee and/or board of directors, fewer than half (42%) said they meet with them frequently and at regular intervals. “I can’t over-stress how important it is for tax to have a ‘seat at the table’ in business discussions,” said Barton. “Tax executives should be called upon to explain and manage the changing enforcement landscape, help management understand potential reforms, and assist with general business planning. Effectively integrating tax leadership in all aspects of the company’s strategy is absolutely vital.”
Other key findings from the survey focused on corporate logistics and operations. For the third year running, 50% of respondents noted that their biggest challenge is to increase activity while maintaining their current staffing model, even with 27% of respondents seeing a budget increase in 2012. More than half (58%) of those polled expect their current tax department budget to remain the same in 2013.
The second biggest challenge (29%) is staying on top of pending and final regulatory and legislative changes. In contrast to last year’s results, effective tax rate planning (45%) has now overtaken cash tax planning (31%) as the most important tax issue impacting their organizations. Among prominent regulatory issues, 45% have started to prepare for the increase in complexity and cost of Information Reporting & Withholding.
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