Tax & Accounting Blog

BEPS: Making sure you get credit, not blame

Blog, Business Tax, Corporations, International Reporting & Compliance, Organisations, Tax November 28, 2017

If you’re working as the chief financial officer or running the tax team for a multinational company, you will have noticed a change in the climate. Around the world, a lot more people are interested in what you do.

It’s suddenly not just the media and political junkies who care about multinational corporate taxes. Arguments about corporate tax payments are popping up in newspapers, on Four Corners, on Twitter and Facebook.

Politicians the world over are making speeches on the topic, prompting what the Dutch tax academic Maarten Floris de Wilde has referred to as “an unprecedented political prioritisation of corporate taxation”.

And the BEPS rules – the package of measures designed to stem corporate Base Erosion and Profit-Shifting – are an important focus of the new global corporate tax scrutiny.

Australia’s Tax Commissioner, Chris Jordan, put BEPS measures front-and-centre in March, when he declared: “The stories and coverage of BEPS-related issues over the past couple of years have led to unprecedented levels of interest in the tax behaviour of large corporates, especially multinationals.” He added that “we are dealing with the minority of those who are not doing the right thing … we now have 71 audits under way in the large business area covering 59 multinational corporations.”

In that same speech, Jordan referenced the Panama Papers, at that time the biggest ever leak of information on the affairs of private taxpayers. That leak has now been overtaken in size by the Paradise Papers, 13.4 million confidential documents about the offshore investments of some of the world’s best-known corporations and individuals.

All this is feeding the media attention on the corporate tax dealings of multinationals. And it comes at a time when trust in business in Australia, as measured by the Edelman Trust Barometer, has dropped under 50 per cent for the first time.

The reaction to BEPS

So we live in a regulatory world where corporate tax teams sit under a spotlight far brighter than they usually endure. Like few such tax measures before it, any hint of an issue in BEPS reporting is likely to attract comment. If and when a multinational company is accused of failing in its BEPS obligations – by one of the more than 100 signatories to the global BEPS agreement – then its arms around the world will immediately come under pressure.

Of course, it’s not just reputations at risk. The ATO can also levy fines of up to $525,000 for late lodgement of BEPS documentation, and the first reports are due imminently, on 15 February 2018.

With BEPS, corporate tax and finance officers have to be prepared to withstand a high level of scrutiny. In Australia, this includes being able to meet the ATO’s “justified trust” standard. Thomson Reuters has discussed this in a white paper and I have also previously written about it here.

The popular solution: Outside help

Thomson Reuters’ own work has confirmed that Australian multinationals are confronting BEPS measures with great caution. Thomson Reuters’ 2017 Global BEPS Survey and dialogues with Australian executives in multinationals have confirmed concerns over the shape of the final rules, the systems changes required for some in-house solutions, and the sheer scale of the implementation challenge. Francesca Lagerberg, London-based global leader for tax services at accounting group Grant Thornton, has noted that multinationals’ tax teams “are really making sure that they’ve got all the information before they leap”.

So most large organisations are still unsure about their ultimate BEPS response, and many are outsourcing their work at great cost for the first year of the new regime.

Thomson Reuters understands the scale of these challenges: we have to prepare our own master file worldwide, and a local file for Australia.

Our solution to simplifying and gaining control over our BEPS response is our own BEPS Action Manager software. It steps us through the data collection and analysis process, makes sure all parts of our corporate network have consistent information for tax authorities, and lets us prepare drafts and lodge our documentation. Our own tax director, Simon Haddad , describes it as “indispensable”.

It’s clear that BEPS puts tax teams under remarkable pressure and accountability. But there are solutions that can meet the challenges.

Learn more at tax.thomsonreuters.com.au/onesource/beps-action-manager/ 

Download our full BEPS implementation white paper here