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October 22, 2021

Deloitte study: Multinationals say the regulations proposed by the OECD may lead to an increase of their tax burden

More than 60% of multinationals worldwide estimate a possible increase in their corporate tax burden as a result of the implementation of the reform announced by Organization for Economic Co-operation and Development (OECD) at the beginning of this year, based on two pillars, taxation of the digital economy (Pillar I) and minimum corporate taxation (Pillar II).

According to the Deloitte 2020 Global BEPS (Base Erosion and Profit Shifting) Survey, 44% of the companies expect a global consensus on digital economy taxation to be achieved as a result of the measures proposed by OECD and almost 40% of them agree that their organization will be affected if a revenue-based digital services tax is introduced in the country where their customers are located.

Among the companies participating in the study, 31% said they have been actively engaged in the OECD’s project consultation.

“The regulations proposed by the OECD complement the plan to combat the erosion of the tax base and the transfer of profits – BEPS – launched seven years ago in order to impose a fair tax system among member states. The digital economy development in the recent years and the challenges encountered in establishing a common position on income taxation thus obtained have led the organization to develop a separate set of policies for this area (Pillar I). The BEPS initiative continues with Pillar II, which includes the proposal to introduce a global minimum corporate tax (the current discussions mention a 12.5% rate). Although Romania is not an OECD member, companies operating in our country are also affected by the organization’s recommendations, as Romania has been an associate of the BEPS project since 2016 and a member of the European Union, and European tax regulations are issued based on OECD initiatives,” said Dan Badin, Tax Partner, Deloitte Romania.

Regarding the impact of the measures in BEPS plan in force, the study shows that 46% of companies claim that the tax authorities in their organization’s country of residence have become increasingly rigorous in tax examinations.

Despite the multiple legislative changes in the tax field worldwide, only 32% of organizations have secured or plan to secure additional resources to face such challenges. At the same time, 47% of participants have increased or intend to increase their investment in tax-related technology to cope with the volume of BEPS-related regulations.

”Initiatives issued in the field of taxation are multiplying, but, beyond the beneficial effect of limiting tax evasion and tax avoidance, they also become an additional pressure on companies from an administrative point of view, as they require greater compliance efforts,” Dan Badin added.

The study also highlights that many of the company representatives (71%) are concerned about the media coverage, political and activist group interest in corporate taxation. In this context, 60% of companies have implemented additional corporate policies and procedures in response to the increased scrutiny related to this subject.

Since 2014, Deloitte has been conducting the Global BEPS Survey annually among the tax managers and CFOs, in order to analyze the impact of the plan implementation on companies worldwide. Now at its seventh edition, the study involved nearly 300 global tax leaders in 38 countries.

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