The Organisation for Economic Cooperation and Development’s (OECD’s) Base Erosion and Profit Shifting (BEPS) project represents a fundamental change to the global tax system. BEPS is already elevating the strategic profile of tax departments within multinational corporations.
As leading tax and business minds around the globe flesh out what the post-BEPS world will look like, it’s becoming apparent that the tax function’s performance – and its strategic credentials – will hinge on its ability to address the massive data management challenge that BEPS and related disruptions create.
This notion represented a key theme at KPMG’s recent Global Indirect Tax Conference in Barcelona. Like other Big-4 firms, KPMG has pointed out that BEPS’ impact will extend beyond the tax department. BEPS-related changes likely will affect customs processes, key financial metrics and forecasts within the treasury and finance functions, customer contracts, how proposed mergers & acquisitions are valued, how corporations manage reputational risk, and much more.
Yet, many of these beyond-tax BEPS ripple effects also will reverberate in ways that ultimately affect how tax departments manage tax data. That’s certainly the case with supply chain and customs processes in a post-BEPS world – a topic at the Barcelona conference that generated interesting, and far-reaching, discussions.
BEPS will increase the complexity of global supply chain management practices. Distinctions between income tax and indirect tax may get blurry, for example. BEPS transfer-pricing requirements may complicate Value-Added Tax (VAT) determinations. Customs settlements and rate applications also will be affected. This will occur at a time when customs officials are aggressively pursuing revenue sources and VAT-fraud initiatives are underway in the European Union and other parts of the world.
All of these changes and activities place greater data management pressure on global tax departments, which can be expected to be called upon more frequently to store, protect, analyze, share and confirm a much broader range of tax data, often in tight time frames.
Of course, managing the potential impact of these transactions on a firm’s effective tax rate has always been a critical component of the tax department’s strategic contribution. Given today’s additional reputational risk associated with global income tax reporting, the need for mastery of this complex data puzzle has grown even more important.
Deriving strategic value from the corporate tax function will require corporations to involve the tax department in day-to-day operations and invest in data management technology. Both steps will serve to expand the role of tax and ensure its value in a post-BEPS world.
Please remember that the Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information.