From the source: the view from tax authorities

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The fifth and final report in our 2017-18 Tax Risk and Controversy survey series, From the source: the view from tax authorities, is now available. Based on a survey of 30 tax authorities in 21 countries between June and December 2017, the report supplements the results of the first four publications, and shares the views of tax authorities on critical issues affecting business taxation today.

From the source: the view of tax authorities

The reports used light as a metaphor for the increased attention on tax in recent years. The beams aimed at tax come from different sources — media, politicians and civic and government organizations around the world. This fifth and final installment, “From the source: the view from tax authorities,” shares the thinking of perhaps the most important source on this subject — the tax authorities themselves. Having surveyed businesses for years on these questions, we are now able to provide an in-depth look from the perspective of tax authorities themselves.

EY - Top 5 G20 Countries
EY - Top 5 non-G20 Countries

“If taxpayers don’t understand what authorities are most worried about, they might encounter controversy where they aren’t expecting it."
— Gijsbert Bulk, EY Global Director of Indirect Tax

Steps to take

  • 1. Bring your tax technology up-to-date

    With governments keen to address indirect tax and digital tax administration on the rise, it will be important to have information technology systems up-to-date and able to respond to requests from tax authorities in real time or near real time. It will also be important to know where your potential controversies fall on tax authorities’ priority lists. They will be less likely to allocate their scarce resources to unique problems, instead looking to challenge arrangements that could apply to many companies.

  • 2. Adopt a global approach to managing tax controversy

    The transparency trend, and the potential for news stories to create reputational risk, suggests that tax controversies should no longer be left to local offices that best know their country’s tax authorities. These have the potential to be global problems, and a controversy with one country could quickly become a controversy with multiple countries. For that reason, a global approach is necessary.

    Does your government support initiatives that would require the public disclosure of taxes paid by businesses?

    EY - Does your government support initiatives that would require the public disclosure of taxes paid by businesses?
  • 3. Take a strategic approach to dispute resolution programs as BEPS certainty grows

    Neither taxpayers nor tax authorities are strong believers in the dispute resolution tools available to them, and that calls into question the basic trade-off for companies — certainty on tax questions in exchange for sharing more details about your business. All of these programs can be very effective tools, under the right circumstances, which means that companies will have to evaluate cooperative compliance programs, APAs and other alternatives on a case-by-case basis for fit and purpose.

    What is your government’s position on the use of cooperative compliance agreements?

    EY - What is your government’s position on the use of cooperative compliance agreements?
  • 4. Monitor — and adapt quickly to — policy shifts and law changes around the world

    The 2017 US tax reform was the biggest change in the world’s largest economy in 30 years. And companies that do business in the US are actively analyzing the impact on their operations. In addition to BEPS implementation around the world and the changes that will bring, many countries may react to the US law with tax reforms of their own. The current cycle of tax reform globally could fundamentally shift tax rules as we know them today, setting the stage for more uncertainty and controversy.

Take action now

The series has made clear that we have entered a new era of tax controversy, as governments and taxpayers alike adapt to enhanced transparency measures and new reporting requirements, many brought about by global efforts to curtail perceived base erosion and profit shifting.

The series has outlined dozens of specific actions businesses should take to successfully manage multi-dimensional, multi-country tax controversy. But as governments continue to implement their own versions of recommended actions and tax authorities begin to receive and share unprecedented amounts of information, one thing is abundantly clear: businesses should develop a cohesive global approach to tax risk and controversy management. Because companies cannot opt out of this increasingly interconnected tax environment, the time to act is now.