A paradigm shift in the global tax landscape

Tax transparency is here to stay. A combination of public pressure and political willpower at both the G20/OECD and European Union (EU) levels has resulted in a paradigm shift in the global tax landscape. Tax leaders face increasing complexity on corporate tax reporting in the EU, with a possible new layer of public CBCR requirements, having a potential impact far beyond the EU’s borders.

Many of the details are still being worked out, and new initiatives are still appearing on the horizon, but organizations that are on top of the changes before they occur will be best placed to ride out the waves of new rules and procedures. For those organizations, this new tax world represents not only obstacles to overcome but also opportunities to grasp. For example, competitive edge, compliance burdens and public image may each either be enhanced or hindered, depending on the choices made.

Comparative Report on CBCR - 4 key takeaways

Recently, together with colleagues from KPMG’s Global BEPS team, I worked on a comparative report on CBCR in the EU, which may be viewed in full here. We identified four key takeaways for tax leaders:

  1. Know what is going on. Staying on top of developments means not being taken by surprise by events and not being forced into a reactive role focused on damage limitation.
  2. Review and, if necessary, adjust tax approaches and policies. This should not be limited to simply complying with the rules, but also extend to leveraging opportunities for more transparent corporate communication with stakeholders and forming enhanced relationships with tax administrations.
  3. Identify corporate structures or practices that are not consistent with the new tax world and design and implement appropriate responses. This can generate collateral benefits where the opportunity is taken to align tax structures with, for example, core business strategies, corporate social responsibility plans, etc.
  4. Anticipate the unexpected and manage associated risks. The international tax landscape is in a state of flux and is, in many respects, unpredictable. Corporate strategies need to be flexible enough to respond to this. This means being able to adapt and adjust with a minimum of internal and external friction. Businesses should anticipate, for example, that increased transparency carries the risk of miscommunication and misinterpretation. They should also anticipate the likelihood that increased transparency could lead to more instances of double taxation and more occasions for disputes to arise.

Summary

Of course, these messages are relevant for many other BEPS-related developments, but are of particular relevance for CBCR given the scope for (mis)interpretation and the increasing complexity and number of applicable rules. The report provides comparative guidance on the EU CBCR initiativesagainst the background of the OECD CBCR recommendations, and offers insights that may help inform businesses as they respond to the four challenges identified above.