U.S. Tax executives are experiencing growing anxiety regarding international tax planning challenges as new issues start to materialize due to potential U.S. tax reform.
Transfer pricing recommendations within the OECD’s Base Erosion and Profit Sharing Plans (BEPS) are especially worrying. According to the 2017 BDO Tax Outlook Survey, “BEPS recommendations around transfer pricing (Action Items 8, 9, 10 and 13) generate the greatest concern among tax executives…” in fact 76 percent of those surveyed currently include transfer pricing mechanisms as part of their organization’s tax strategy.
On an encouraging note, tax leaders who participated in the survey indicate that their anxiety is spurring them to action: 57 percent of survey respondents report that their functions are taking proactive steps concerning the implementation of BEPS requirements. That said, more than one-third of respondents say they are waiting for individual countries to finalize their adoption of BEPS measures before taking action.
Waiting may prove risky, especially with regard to rapidly approaching BEPS compliance dates, such as country-by-country (CbC) reporting requirements, which in many countries take effect for tax years starting on or after January 1 of this year. “Now that the country-by-country reporting deadline is looming, businesses need to take steps to proactively adjust their financial reporting practices and prepare for future changes related to transfer pricing mechanisms,” notes BDO National Managing Partner of Specialized Tax Services Paul Heiselmann.
BDO’s third annual Tax Outlook Survey report – a 12-pager packed with infographics – also sheds light on how tax executives feel about U.S. tax reform, R&D tax credits, state and local tax trends, cybersecurity liabilities and more. These cybersecurity concerns are noteworthy, and they reflect issues that everyone in the organization, including tax executives, need to consider and address. As tax teams increasingly use advanced data management technology to increase efficiency while improving governance and control, the transaction data they have for Transfer Pricing Actions 8, 9, 10, and 13 (which include some highly sensitive financial and transactional details) must be kept secure, especially within publicly traded companies.
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.