A global survey of 2,600 businesses in 36 countries finds little impact from the OECD Base Erosion Profit Shifting (BEPS) programme which was finalised last October, as 78% of businesses say they have not changed their approach to taxation, even though more than 80 countries have agreed to adopt at least the minimum elements of the BEPS Action Plan. This is despite the fact that the action plan should, in principle, change the landscape for businesses operating in foreign countries.
The lack of impact is even greater in the G7 (83%), with 89% of US businesses and 86% of UK businesses saying that BEPS has had little impact on their tax planning. In New Zealand, 92% of businesses surveyed have not changed their approach to taxation.
According to the businesses surveyed, BEPS has had the greatest impact on business tax planning in Indonesia (35%), Nigeria (38%) and India (36%).
As part of the BEPS plan, businesses are being asked to provide corporate tax information to local and international authorities and the two greatest concerns with the practice is the additional administrative burden it creates (25%), followed by cyber security concerns (15%). New Zealand businesses’ top concern is also the administrative burden (30%), followed by concerns about how the information will be interpreted (28%); the third biggest concern in New Zealand is cyber security (16%). Additional administrative burden was also cited by 35% of businesses in UK and by 32% in the US.
“It is fascinating that after the initial excitement around BEPS, and its potentially game changing elements, so few survey participants have taken active steps to change what they are doing,” says Greg Thompson, National Director, Tax, at Grant Thornton New Zealand.
“There will be lots of reasons for this. A number will hold back until they’ve seen what others are doing in their industry or region. Governments haven’t yet explained how or even if they will implement BEPS in some countries, so that leads to business caution.
“Limited change has taken place in New Zealand because our Government has taken a more measured approach and will incorporate BEPS into the country’s existing tax policy process. Some parts of the BEPS programme are already in law, some in consultation and a few more parts are detailed in Inland Revenue’s recently released tax policy work programme for the next 12 months. Examples of change include the GST on imported services, taxation of hybrids, information sharing agreements, foreign trust disclosure requirements, and thin capitalisation changes,” says Thompson.
While the Inland Revenue is not charging ahead with wholesale change, businesses operating in the international environment face a different approach from tax authorities in every country.
“Businesses would undoubtedly benefit from more guidance on what they should do next internationally. Many will have been bitten by retrospective legislation or rule changes on tax in recent years; they will be nervous about taking action before the ground rules are clear. The recent EU action against Apple and its agreements with Ireland does not help make these tax issues any clearer for businesses.”