Firms Surveyed On Attitudes To Tax Planning
Nearly three quarters of companies surveyed by legal practice Allen & Overy said that their approach to tax planning either sometimes or often conflicts with the domestic tax authority’s expectations.
350 senior-level executives operating in a range of jurisdictions were questioned by FT Remark on behalf of Allen & Overy about their tax strategy. 77 percent said that their investors have had an increased influence on their tax strategy, with many demanding more access to data and financial savings. 88 percent of respondents said that their board’s expectations of a tax director’s role has evolved over the past five years, with the role now seen as more strategic than technical. Two-thirds said that tax issues are discussed every quarter at board meetings, while 60 percent explained that, five years ago, tax was only discussed every half year.
Lydia Challen, Tax partner, Allen & Overy, commented: “Businesses have to consider a range of often conflicting factors – including fiduciary duty to shareholders, social responsibility and what the law allows – when setting their tax strategies. Governments may need to start thinking about how to sell the idea of tax ‘fairness’ to investors if they want to see a sea-change in corporate tax behavior.”
Gottfried Breuninger, Tax Partner, Allen & Overy, added: “As tax becomes an increasingly high profile issue, corporates need to focus on how it fits into their overall business strategy and how they communicate tax plans to their various stakeholders, be it shareholders, employees or the communities they operate in. Tax teams can’t operate in isolation when the impact of tax plans can have such wide-reaching effects on the rest of the business.”
Respondents were also asked to comment on the broader impact of the UK Government’s introduction of a Diverted Profits Tax (DPT). This charge will apply to multinationals that enter into “contrived” arrangements to divert profits from the UK by artificially avoiding establishing a permanent UK base or by inflating expenses paid by their UK operations. The DPT will be set at 25 percent of the diverted profits.
When asked how a UK-style DPT would affect their business, 52 percent of respondents said that they would consider changing their tax strategy if a similar proposal were introduced in their region.
Challen said: “The DPT was a clever political move by the Chancellor of the Exchequer, but it remains to be seen whether it has adverse effects on inward investment and UK jobs. We can understand corporates’ concerns about it being replicated elsewhere because under the proposals there is a real risk of double taxation. Businesses are trying to find their feet in this new landscape.”
