Why tax technology is critical in 2016
2015 has officially come to an end. Amidst the ending celebrations, packing away of decorations, and last spoonful of dessert, many of us are putting together our work plans and resolutions for 2016. And looking back at last years’ list, there remains one capitalised, un-crossed-off item: BEPS
Perhaps your organisation overlooked the OECD’s Base Erosion and Profit Shifting Action Plan in 2015, opting instead to wait and see what countries enacted related legislation. If this has been your thinking, you may want to underline it on your 2016 resolution list and proactively address BEPS with tax technology. Here’s why.
The OECD’s BEPS Action Plan, which will overhaul international tax rules and strive to end corporate tax avoidance, received endorsement by the G20 finance ministers last September and was finalized in October during a meeting of the G20 heads of state in Antalya, Turkey. Under the plan, country-by-country reporting will be implemented for tax years starting on or after January 1, 2016, with filing within 12 months from tax year end.
Numerous countries around the world—including the UK, Australia, Spain, Mexico, the Netherlands, Poland, South Korea and China—have already enacted legislation in accordance with these guidelines. And each day, more and more countries are coming onboard.
Thomson Reuters recently hosted a Q&A session with Pascal Saint-Amans, Director of Tax Policy for the OECD. Pascal noted that the financial crisis was a wake-up call for governments to regulate globalisation and gave the OECD an opportunity to “fix the rules”. He also noted that tax directors and CFOs must be better aligned (perhaps another item for your 2016 resolution list?) and that one of the successes of the BEPS agenda was making tax a board level issue.
Additionally, there will be an intense focus on the implementation of BEPS in a consistent and coherent manner in the years ahead, with the OECD and G20 countries monitoring the impact on both double non-taxation and double taxation. Both groups have agreed to continue to work together on BEPS until 2020. The intention is to develop “a more inclusive framework to support and monitor the implementation of the BEPS package”. This proposal will be presented to the G20 at its February 2016 meeting.
Despite the acceleration of BEPS, a recent survey conducted by Thomson Reuters and TP Week found that nearly half of the multinational companies surveyed are not actively preparing for the complex reporting requirements they are likely to face under BEPS.
This is why comprehensive tax technology is critical in 2016. It ensures consistency between transfer pricing policy, implementation, and documentation. Without it, multinational companies in a post-BEPS era will face a higher risk of error and inconsistencies—and a potentially higher risk of audit.
To avoid these issues, corporate tax departments must resolve to implement comprehensive tax technology for a standardised and sustainable worldwide tax data collection process. This is the most critical layer in the foundation for BEPS compliance in 2016 and beyond. Make sure it is one resolution you keep.