Multinationals are changing tax policy in face of political scrutiny – survey

by Stella Dawson | | Thomson Reuters Foundation
Thursday, 6 March 2014 16:26 GMT

A Toposa girl pans for gold in the Singaita River in Namorinyang, South Sudan October 24, 2012. REUTERS/Adriane Ohanesian

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Thirty-one percent of executives surveyed by Taxand said they have changed their tax planning as political debate escalates over corporations shifting profits to low-tax regimes

WASHINGTON (Thomson Reuters Foundation) – Political debate over corporate tax dodging is causing confusion in the board room and nearly one third of multinationals surveyed say they have changed their tax plans as a result, according to a new study.

In its 2014 survey Taxand, a global organisation of tax advisors to international corporations, said 76 percent of chief financial officers said exposure in the media of corporate techniques to lower their tax burden has hurt their companies’ reputation and 31 percent said it has made them change their approach to tax planning.

The findings illustrate how the campaign by civil activists for corporations to rethink their responsibilities and contribute more in tax revenues to the countries where they have major operations is starting to change corporate behaviour. 

Tax Justice Network estimates that global tax evasion could be costing more than $3 trillion a year and that an estimated $32 trillion may be held in tax havens. Developing countries in particular complain of losing tax revenues through sophisticated corporate tax evasion.    

Reports that major companies such as Starbucks, Amazon, Apple and others have used aggressive tax planning to lower their tax bills by shifting profits to low-tax regimes – a method that is legal - has caused political outrage, especially in Europe. 

The Group of 20 leading world economies agreed last month to develop stricter rules on cross-border taxation as a way to close loopholes that have allowed profit shifting.

In the Taxand survey, 20 percent of respondents said that profit shifting, also known as transfer pricing, was the most challenging aspect of global taxation and fewer than half said that splitting corporate profits among countries where they operate is a realistic solution for global tax reform. In addition, 78 percent said tax compliance costs have risen in the past year and 73 percent said tax audits are increasing.

"This uncertainty around tax is damaging multinationals’ confidence to invest and subsequently hindering the global recovery,” said Frédéric Donnedieu de Vabres, Chairman of Taxand in a press statement on the release of the study.

Taxand said that for its Global Survey it interviewed chief financial officers, tax and finance directors across industry sectors in over 30 countries with operations in the Americas, Europe and Asia.

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