Majority of businesses calling for more transparency on acceptable planning, updated tax rules for a modern, digital economy and the harmonisation of global corporation tax rates, according to the Grant Thornton International Business Report (IBR), a survey of 2,500 senior executives in 34 economies.
The Organization for Economic Cooperation and Development (OECD) prepares to deliver the first phase of its Base Erosion and Profit Shifting (BEPS) action plan in Australia this week.
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The survey shows that 82% of business leaders around the world cite tax policy as a priority, with Canada even higher than the global average at 86%. Around the world, 44% believe G20 action on transparency and avoidance would help them grow their operations, but just 23% believe this is likely to get the required global agreement.
In Canada, just 16% say it’s likely to get approval, and nearly half say they’re unsure whether there can be global agreement on BEPS.
Brad Rolph, transfer pricing leader at Grant Thornton LLP in Toronto, said: "Ever since news surrounding the tax practices of large multinational such as Amazon, Google and Starbucks, broke last year, we’ve seen a fierce debate around global tax planning. Since that time, we have been tracking business sentiment on the need for more transparency in tax planning, which has shown that business leaders have a strong desire for increased clarity.
It’s a complex issue, particularly since businesses have a responsibility to their investors and shareholders to keep costs down, while governments and other stakeholders are calling on multinationals to pay their ‘fair share’ without providing a clear set of rules or principles. We’ve also recently seen high-profile companies enter Canada in part to benefit from our own lower corporate taxes."
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By GlobalData"Clearly, tax planning is a major issue for business leaders in Canada and around the world, and there is a huge appetite for global action to update transfer pricing guidance to boost growth prospects," continues Rolph. "At the same time, though, multilateral agreements on complex issues are notoriously difficult, as we’ve seen on climate change negotiations. Our clients are hopeful that when the first phase of the OECD action plan is released, we’ll begin to see a gain in momentum, which will ultimately be beneficial for business in Canada and around the world."
When executives around the globe were asked the best way to improve global tax systems, the top response was a call for increased transparency in what is acceptable in tax planning (61%), followed by updating tax rules for a modern digital economy (59%), and harmonization of global tax rates (57%).
In the United States, 67% cited the need for updated tax rules, followed by harmonization of global corporation tax rates (63%) and increased transparency in what is acceptable tax planning (61%).By comparison, Canadian survey respondents agreed that increased transparency was the top priority (53%), followed closely by updating tax rules (50%).
When asked which areas of G20 focus would be most beneficial for Canadian businesses, the top answer was targeting employment (48%), followed by infrastructure and investment (45%) and fiscal and monetary policy (40%).
"It’s clear that international tax standards need to evolve to represent the increasingly integrated world we live in today," continues Rolph. "Aging legislation no longer fits in an increasingly interconnected, digital world in which the definition of a ‘border’ is archaic and next to meaningless. The important work being undertaken by the OECD should help move the debate from talk to action."
Brad Rolph, national leader of Grant Thornton’s transfer pricing practice in Canada, is available to discuss BEPS issues and OECD announcements. For nearly twenty years, he has helped multinational companies of all sizes across diverse industries and geographies to plan, implement and defend their transfer pricing policies. He was the first economist hired by any of the Big 4 accounting firms in Canada to practice transfer pricing exclusively, and he is recognized as one of Canada’s leading transfer pricing advisers.
