Written by Claire M.C. Kennedy
Businesses are invited to participate in an international survey from the CD to measure the impact of tax uncertainty on their investment decisions. Companies have until December 16 to participate in a confidential questionnaire that will take about 30 minutes to complete online. Senior tax or finance directors of businesses that operate internationally or that have considered or are considering foreign expansion are best suited to complete the survey. The survey results will be used by the CD to assess the extent to which tax uncertainty negatively impacts business investment and to get a better understanding of the factors contributing to tax uncertainty in various jurisdictions that may need reform.
The survey is (belated) recognition by the G20 that increased tax uncertainty ”in no small part due to the radical and rushed overhaul of international tax rules undertaken by the CD (the so-called base erosion & profit shifting, or BEPS, action plan) in the past three years” is dampening global investment and growth at a time when countries are desperate to increase growth. While the BEPS action plan reports are now final, there is still time to reduce the cost of these measures to business by improving governments' tax administration and improving international tax dispute resolution. Too often businesses are caught in the cross-fire between competing tax agendas in different countries and end up subject to double tax. The problem surely will only grow once the first country-by-country tax reports are delivered to eager officials in 2017.
The online survey is available until December 16.
The CD Business Survey
The survey has 5 sections:
The first two sections cover the position of the respondent in the organization (usually tax or finance director) and information about the company (annual turnover, assets, employees and HQ location) without explicit identification (the survey is confidential).
Economic Factors Affecting Investment Decisions
Section 3 asks respondents to rate various tax and non-tax business factors impacting investment (e.g., political uncertainty, corruption, labour costs, tax environment, quality of education).
Sources of Tax Uncertainty
Section 4 covers tax factors in more detail (e.g., effective tax rate (ETR) and uncertainty in ETR, specific tax incentives, treaty network) and addresses corporate income tax, withholding taxes and GST/VAT.
It asks respondents to select up to four countries (of which up to two can be states in which they have decided not to invest) and to rate on a scale of 1-5 the sources of tax uncertainty, subgrouped under headings:
- Legal System (poorly drafted laws, retroactive changes, no statute of limitations, etc.)
- Tax Administration (absence of tax rulings, excessive red tape, etc.)
- Dispute Resolution (timeline for court or tribunal hearings, etc.)
- International Dimensions (local law conflicting with international norms, etc.)
Enhancing Tax Certainty
Section 5 asks respondents to rate measures to improve tax certainty, such as better drafting of laws, consultation with taxpayers when new measures are introduced, availability of tax rulings and advanced pricing agreements, streamlining tax administration, etc.
Business Input to International Tax Reform
The results of the CD survey will be compiled and reported in an aggregated, anonymized format to the G20. The survey results will shape the agenda for future international tax changes and it is therefore imperative that business voices are heard.
The survey is a welcome, if overdue, call for input from the business sector to international tax reform and a tacit admission that recent efforts at clamping down on legal tax avoidance by multinational enterprises, too often confused or deliberately conflated with Panama Papers-style tax evasion committed by individuals and their private company proxies, is making the global environment less friendly to cross-border trade and investment.