With countries continuing to respond to Base Erosion and Profit Shifting (BEPS)-related transparency and disclosure requirements, report finds that increasing tax enforcement and new transfer pricing rules were the main sources of tax burden.
The report ‘Outlook for global tax policy in 2017’ by EY notes that global tax reforms and sustained weak economic growth continue to disrupt the competitive landscape in tax across the globe, driving countries to introduce new business incentives in order to compete.
In today’s world, the business and tax landscapes have changed, the pace and complexity of change continues to increase. Tax authorities are adapting their enforcement strategies, focus and policies in response to the changing dynamics of business. While companies are balancing competing priorities, ensuring they maintain compliance while adding value.
In the report, the number of countries forecasting an increasing business tax burden continues to rise, with 22percent expecting an overall increase in the Company Income Tax (CIT) burden in 2017 (versus 18percent in 2016).
It also finds that nine jurisdictions forecast a higher indirect tax burden, as the worldwide spread of Value Added Tax (VAT) and Goods and Services Tax (GST) continues and technology is adopted more widely by tax administrations.
While the long-term trend for countries to pursue a low-rate, broad-base business tax strategy remains strong in 2017, implementation of the G20/ Organisation for Economic Co-operation and Development (OECD) Base Erosion and Profit Shifting recommendations and draft legislation introduced by the European Commission are now compelling governments to seek alternative means of immediate change to remain competitive.
The report finds that broader business incentives designed to stimulate or sustain investment will receive increased government investment in 30percent of countries surveyed, while 22percent foresee more generous research and development (R&D) incentives in the year ahead.
Countries are further seeking to stimulate economic activity and to attract foreign direct investment by maintaining or lowering corporate tax rates.
Nine of the 50 countries surveyed confirm that laws are now in place that will drive lower corporate income tax (CIT) rates this year, with eight of those countries based in Europe (versus just three last year), indicating that the epicentre of BEPS has moved into Europe and that countries in the region are reducing rates faster than elsewhere.
The majority of respondents (80percent) report no anticipated or known change to their national headline CIT rate in 2017, while only one outlying country – Chile – forecasts a known or anticipated rate increase.
Iheanyi Nwachukwu
