More than half of multinational companies around the world find that the tax authority in their country are becoming more rigorous in tax examinations as a result of the Global Tax Reset and the Organization for Economic Co-operation and Development (OECD) Base Erosion and Profit Shifting (BEPS) initiative, according to a dedicated survey conducted by Deloitte. Also, two thirds of the respondents indicate that the tax authority is increasing the use of data gathering and data analytics tools, in line with the increased use of technology around the world. Among the European countries, UK leads (85%), followed by France (71%). Since 2014, Deloitte has been conducting the OECD Base Erosion and Profit Shifting survey annually among tax managers and CFOs in order to analyze the impact of implementing the BEPS plan initiated by the OECD. This is the sixth edition of the survey and it was conducted in 35 countries.
“Although Romania is not a member of OECD, it has pledged its commitment to the BEPS initiative and signed the multi-lateral instrument. This initiative has already had an impact on multinationals operating in our country. We expect the local fiscal legislation to undergo further changes as a result of the BEPS initiative and the local tax authorities to adapt consequently. As for Romania this may happen with some delay, as the multi-lateral instrument was not yet ratified, and multinational companies should take advantage of this time frame in order to get prepared,” said Dan Badin, Tax & Legal Partner-in-Charge, Deloitte Romania.
Throughout 2018, countries continued to implement the BEPS recommendations into their domestic laws, underlines the OECD Base Erosion and Profit Shifting survey. The involvement of C-suite and board of directors in organizations’ tax strategies remains consistently high over the years. Despite 76% of boards being actively engaged in tax governance, only 23% have secured or plan to secure additional resources for their tax function.
More than a third of the respondents say their companies have already implemented BEPS-related changes in their operating model or will do so in 2019. “The potential impact of the BEPS initiative is not to be underestimated, as it can lead to reputational, financial or even operational risks for the Romanian subsidiaries of multinational companies,” said Dan Badin.
The 2019 survey raises for the first time the topic of the digital economy taxation, on which only 43% of respondents expect a global consensus. More than a third of the respondents agree that their organization will be affected if a revenue-based digital services tax is introduced in the country where their users are located. “Romania has also contemplated the idea of a tax on turnover for digital services. The idea hasn’t been abandoned, the law makers are probably waiting for the European Union to take the lead on this matter,” said Dan Badin.
Respondents also underline that cross-border coordination is lacking, with 61% expecting unilateral changes in their country without coordination with other countries and only 21% expect consistent interpretation of the changes to the transfer pricing guidelines.
Also, 71% of the respondents say the corporate tax compliance burden will substantially increase as a result of a growth in the number of foreign permanent establishments resulting from the BEPS recommendations. “This is also likely to be valid for Romania, so we urge multinational companies operating in our country to review their business models, keeping in mind the BEPS initiative,” said Dan Badin.
The survey also found that external forces are impacting multinational companies’ tax policies, with 74% of respondents becoming more aware of the focus on corporate taxation. In this context, 64% of these companies have implemented additional corporate policies and procedures in response to the increased focus.