BEPS is looming large over the tax affairs of businesses across the world but two factors are slowing compliance.
In the meeting rooms of the OECD’s Paris headquarters, “BEPS implementation” is the task of getting all the many rules in place to control Base Erosion and Profit Shifting.
In the tax departments of multinationals around the world, however, it means something else: the tough grind of implementing new systems designed to comply with these rules.
That work has grown more urgent as the first BEPS deadlines loom. Companies with December 2017 balance dates will be the first to be required to comply with the new global regime.
Corporate executives and tax team leaders are naturally cautious about offering up reports on their own progress towards meeting the BEPS challenges. But Thomson Reuters has been able to use the results of its third annual Global BEPS Survey, which received responses from 135 corporate executives and tax and transfer pricing executives across dozens of countries and industries.
Thomson Reuters has also benefited from discussions with chief financial officers and senior tax staff at a number of Australian multinationals.
Comply at all costs
The result of all these inputs is a picture of corporate caution. Businesses want to minimise the risk of BEPS non-compliance, even if that means spending more on outsourced tax and accounting services.
In the Thomson Reuters 2017 Global BEPS Survey, two-thirds of respondents appear to be facing challenges in implementing their BEPS response. Few multinationals are highly confident in their ability to respond to the most frequently-cited BEPS challenges – country-by-country reporting requirements, and master and local filings.
Though Australian multinationals’ executives were not among the respondent to the 2017 global survey, Thomson Reuters’ local dialogues have made clear that Australian businesses are hanging back from implementing their own systems for BEPS compliance. Instead, many Australian multinationals –even some of the largest – have turned to accounting firms to show them the way.
Ben Scull, Managing Director for Tax & Accounting ANZ at Thomson Reuters, says some of these firms plan to educate themselves with the help of outside accounting firms and then reassess for 2018. He describes two factors which are driving the caution over BEPS within corporate Australia.
Uncertainty 1: The final rules
The first driver of uncertainty is the unfinished state of global BEPS rules – a key factor for multinationals which operate in countries still finalising their BEPS regimes.
The OECD’s BEPS agreement gives individual nations room to move on how they implement the measures. The international foundation of BEPS rules means multinational companies must first wait for and then absorb and understand different rules in every country.
The Australian Taxation Office has published most of its key rules and guidelines on BEPS – for instance, how to make your master and local files compliant, and how to lodge them. Says Scull: “Australia was very good at getting on the front foot and putting their guidelines out, and their requirements.” But he says authorities in many other countries have been slower to put their rules and processes in place.
Uncertainty 2: IT changes
The second factor driving uncertainty within businesses is that the BEPS measures require substantial changes to IT systems. “If you look at the uptake of businesses in Australia who are prepared for BEPS and the filing requirements using technology, it’s very minimal,” Scull says.
Thomson Reuters’ surveys and discussions over the past two years suggests that many tax executives around the world and in Australia have been reluctant to lead adoption of new systems to deal with BEPS measures.
Conclusion: A justified concern
Given Australian multinationals’ uncertainties over BEPS, it’s no surprise that they should want to outsource in their first year of BEPS accounting.
“Companies are concerned,” Scull says. “But … they also know that there are a lot of accounting firms out there who are willing to help or take on the burden for them.”
So although outsourcing to accounting firms may cost more money, many firms consider that an acceptable trade-off in the risky first year of the global BEPS initiative.
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