In Asia-Pacific, two-thirds of Outlook respondents foresee higher levels of tax enforcement and more tax audits in their jurisdictions in 2023. Activity related to enactment of new or expanded criminal tax laws is also expected in 2023 – with new measures possible in Indonesia, the Philippines and Singapore.
“The current push for good governance in tax has been embraced by many revenue authorities in Asia-Pacific,” says Martin Caplice, EY Asia-Pacific Tax Controversy Leader. “Indeed, Australia’s Top 1,000 Combined Assurance Review program is regarded as a leading initiative and may inform other revenue authority programs in the region.” New Zealand follows a slightly simpler approach than Australia, requiring the 50 largest companies operating there to fill out a 10-point questionnaire each year. In addition to ongoing tax governance regimes in China and Japan, other jurisdictions are introducing voluntary programs, including Singapore and Malaysia.
More collaboration in Europe, the Middle East, India and Africa (EMEIA)
“Member States in the EU will have a full tax agenda in 2023, including follow-up work on the Pillar Two Directive, formal adoption of CBAM and several transparency initiatives. The EU also has very ambitious plans for additional initiatives in 2023, including on how to make the EU more competitive,” says Marlies de Ruiter, EY Global International Tax and Transaction Services Policy Leader. More work is anticipated on the EU Green Deal, the Business in Europe: Framework for Income Taxation (BEFIT) initiative, a proposed directive to prevent the misuse of shell entities for tax purposes (known as UNSHELL or ATAD III) and withholding tax procedures. “There is so much overlapping activity, companies must try and monitor the entire landscape, not just one or two provisions as they are all connected,” says Maikel Evers, EY EU Tax Policy Hub Leader.
Substantial tax policy developments are also occurring in the Middle East and North Africa region, including the implementation of VAT in some Gulf Cooperation Council countries. The United Arab Emirates has introduced corporate income tax that includes transfer pricing rules broadly aligned with OECD principles, including the arm’s-length standard. Bahrain is also discussing possible introduction of a corporate income tax system that would apply more broadly than the oil and gas sector.
In EMEIA, almost half of Outlook respondents foresee higher levels of tax enforcement in their jurisdictions in 2023, and no respondents expect a decrease in enforcement activity. Transfer pricing remains a leading issue for revenue authority scrutiny, with particular focus on IP onshoring transactions, high-value services, treatment of risk, operating margins for distributors, and financial transactions. The level of transfer pricing documentation required by revenue authorities in the region is expanding, and almost half of EMEIA respondents say that revenue authorities are already sending taxpayers requests for information that are more numerous and detailed than in the past.
There are also new and evolving criminal tax laws across the region. These include new revenue authority processes such as those of the French tax administration, where a criminal investigation may now be automatic if a taxpayer is facing high tax penalties. The UK is actively using its Corporate Criminal Offence regime, and Germany is considering a new criminal tax law.