See the KPMG – Developing a common framework for disclosing tax information – executive summary and actions proposed and below quote:
There can be little doubt that the debate around greater tax transparency by companies is becoming increasingly prominent. There are a growing number of calls from various parts of civil society for companies to be transparent about where they operate around the globe, where they make their profits, where they pay their taxes and how much tax they pay.
The above has a relation with the recent UK consultation request to publish company’s tax strategy, sign off such strategy by the executive and the voluntary code of conduct as discussed earlier in a previous article “Improving large business compliance“.
The impact goes beyond the UK when the company’s tax strategy is actually published on either the business website or in the annual report.
- The strategy should set out the business’s attitude to tax risk, its appetite for tax planning and its approach to its relationship with HMRC.
- It may also cover the governance framework describing the way a business takes decisions on taxation. The research found that “businesses with a greater appetite for risk tend[ed] not to have written (or published) tax strategies, while those with lower risk-appetite tended to have more formalised strategies.
- Businesses will be required to inform HMRC as and when it is published.
- It also shows us that increased scrutiny of tax strategy by a business’s Board actively discourages aggressive tax planning, with businesses stating that tax was now of “particular concern for senior management.
- Building on this, the proposal is to include a requirement to have a named individual at Executive Board level who is responsible for owning and signing off the tax strategy. This will further encourage bringing responsibility for tax into the boardroom and align with the best practice many businesses already exhibit.
- The proposed requirement for Board-level oversight echoes the existing Senior Accounting Officer (SAO) regime, which provides assurance that a business has adequate tax accounting arrangements in place. The SAO regime does not, however, extend to a business’s tax strategy. It is our intention that this proposal is kept apart from the existing SAO regime.
- The consultation request is – when a company’s tax strategy is in the end actually published – therefore in my view a ‘tax trend beyond UK’ also when you read this in combination with other (e.g. OECD) initiatives.
The consultation request – when a company’s tax strategy is in the end actually published and what currently proposed is in force – should be seen in my view as a ‘tax trend beyond UK’ also when this is read in combination with other (e.g. OECD) initiatives.
I gathered most relevant documents for quickly access in the chapters ‘Audit Defense‘ and ‘Tax Trends‘. Those initiatives are or will be embraced by governments for establishing a good and effective tax audit practice (see also below performance review of tax administrations).
Understanding the bigger picture and how it all fits is therefore important.
I gave as example on the GITM website that certain countries have implemented Standard Audit File for Tax Purposes submission (also originated from OECD). In Europe: Austria, France, Luxembourg and Portugal have already implemented SAF-T. The SAF-T standard, originally created by the OECD, is intended to give tax authorities easy access to the relevant data in an easily readable format. This leads to much more efficient and effective tax inspections.
In line with SAF-T obligations, from 1 January 2016 registered businesses in the Czech Republic will be required to file a new VAT return which will have details of each taxable transaction made with other Czech registered business. The Slovak Republic and Hungary have also introduced similar VAT filing requirements in order to prevent VAT fraud.
Other countries such as Netherlands still have their own local methods, but that might change soon. The Dutch tax authorities announced on May 19, 2015 that 5,000 of its 30,000 employees will lose their current job, while at the same time 1,500 specialized data analysts will be hired as tax returns will be automatically assessed via data analysis. The world how we know it is changing.
A pending reorganization at the Dutch tax authority Belastingdienst will likely result in the elimination of 4,000 to 5,000 jobs. The staff cuts are due to improvements to computer systems that reduced the need for many spot checks done by workers, reports broadcaster NOS. Improvements to information technology infrastructure will lead to better data analysis, and thus more accurate tax assessments, sources told NOS. This should not only reduce the amount of tax evasion, but also increase the amount of tax revenue received by anywhere from hundreds of millions to billions of euros every year.
The documents gathered in chapters ‘Audit Defense’ and ‘Tax Trends’ – should give a clear view of that bigger picture – about trends and actions needed to manage CIT and VAT.
These documents and initiatives should also be read in combination with the latest surveys: the performance review of tax administrations ‘OECD Tax Administration 2015‘ and ‘OECD – Update on voluntary disclosure programmes‘.
The tax world is changing fast and it is important to keep up:
- From a direct tax and indirect tax perspective begin to think further about how this aspect of tax strategy will be articulated on both a UK and international basis
- If the UK document is going to be published, as planned in the consultation, it will be accessible to other tax authorities of course and they will need to be considered when drafting even a purely UK strategy document
- Make all the improvements possible in the time before such legislation comes into force so that the starting position is as strong as possible