World governments are in clawback mode and multinationals are the top target.
Governments around the world are on the hunt for revenue, and strengthening their corporate tax regimes is one popular way of doing it. That means multinationals will face higher taxes in many of the jurisdictions where they do business, according to international tax consultant Taxand.
Many countries have already beefed up their rules related to transfer pricing (see related story here) as well as begun working together in tax treaties to help combat any ploys they feel run afoul of tax codes. This is confirmed by Taxand, which asked 33 of its advisors from 31 countries to reveal the top three tax changes in their countries introduced in 2010. Governments and tax authorities around the world have been over the last year “applying greater scrutiny on tax-driven activities and structures and by increasing the number of taxes to be collected in 2011 and beyond,” the company said in its survey, the 2010 Tax Milestone Survey.
Some of the penalizing taxes the tax consultant found include an increase in the value-added tax (VAT) rate that will be imposed by six countries in the coming years as well as an increase and/or expansion of VAT on certain goods in two other countries. Also to be expected are an increase in tax inspection and anti-abuse measures in Spain, and the abolition of exemptions in countries like Ireland, Thailand and Austria.
And while there are glimmers of hope regarding corporate taxes in the US (see related story here), including plans by the Obama administration to simplify the system and lower coporate tax rates, the Internal Revenue Service will still require corporations with $10mn or more in assets to identify uncertain tax positions (UTPs) for the next five years, Taxand said. This previously only applied to corporations with $100m or more in assets, Taxand noted.
Despite the gloomy tax outlook, Taxand acknowledged that there a few new measures that will have a positive impact on MNCs, including a reduction in the corporate income tax rate expected in five countries beginning in 2011. Also positives are a relaxation of the controlled foreign company (CFC) rules as well as some tax incentives and reductions to be offered to various industry groups or sectors in the UK.
“The US, China, Spain, Austria, India, Thailand, Romania and Turkey are particularly notable … as countries whose authorities have introduced measures designed to apply more scrutiny on multinationals’ tax-driven activities and who are going down the route of collecting more taxes from multinationals,” Taxand said. On the other hand, the UK, Canada and Malaysia are among the few countries where favorable tax policies have been introduced.
“Global tax policy appears to be going down two very different routes,” said Frédéric Donnedieu de Vabres, chairman of Taxand. One is by applying “more rigorous scrutiny of tax procedures and/or by increasing tax liabilities outright” and the other by introducing “a range of favorable tax policies designed to encourage multinational companies to invest in and expand with them.”