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Tax transparency among top priorities for multinational corporates

Deloitte has released its tenth annual Global Tax Policy Survey 2023 results. The latest survey features many new topics that were high on their agenda in 2023, such as EU legislative proposals, international remote work and the continued focus on Environmental, Social, and Governance matters, in addition to respondents’ views on the progress of the OECD’s Pillar One and Pillar Two initiative related measures and their approach to tax transparency. 

This year’s survey findings showed that Pillar Two is expected to happen, and businesses are preparing for the impact. More than eight of every ten surveyed (85%) expect that a critical mass of countries will implement an Income Inclusion Rule under Pillar Two by 2025 or earlier. A similar number (81%) expect a critical mass of countries to implement an Undertaxed Profits Rule under Pillar Two by 2026 or earlier. Around one-third (34%) of respondents expect that Pillar One/Pillar Two will significantly increase their group’s global effective tax rate. Two-thirds (67%) of respondent groups do not expect that implementing Pillar Two will cause them to make significant changes to their corporate structure. A majority (56%) have done at least some kind of modelling of the impact of Pillar Two on their tax profiles. 62% are somewhat confident that they will have readily available tax and accounting data necessary to comply with Pillar Two.

The survey also found that stakeholder interest in tax will continue to increase but is becoming the new normality. Three-quarters (75%) of respondents expect some level of increase in stakeholder interest in tax behaviour and outcomes of large corporates over the next three years. Over half (56%) have a neutral response to the continuing interest of media, political and activist groups in corporate taxation. Some 41% agree or strongly agree that it requires significant resources from the tax function to respond to media, political or activist groups in corporate taxation. Meanwhile, 67% agree or strongly agree that the C-suite and/or board of directors are actively engaged in establishing and/or approving their group's tax strategy and in assessing and monitoring risk in this area.

Elsewhere, tax administration and tax disputes remain high on the corporate agenda. Only a quarter (25%) of respondents agree or strongly agree that most tax administrations are interpreting the OECD Transfer Pricing Guidelines consistently. Some 40% agree or strongly agree that the tax authority in their ultimate parent’s jurisdiction has become more rigorous in tax examinations in the last 12 months, while 42% are neutral. A majority (60%) of respondent groups remain concerned about the lack of guidance from tax authorities worldwide about the principal purpose test. Today, 41% of respondent groups are interested in joining a cooperative tax compliance programme where available, and 11% have already joined or are in the process of joining such a programme.

Tax transparency standards and strategies feature widely, but many plan to keep this within standard financial reporting. Over half (54%) of respondents expect their group to align its external communication concerning tax performance with a transparency standard. Four in every ten (40%) have an up-to-date tax transparency strategy for their group, which has been tested with the senior leadership. Just over one-third (37%) do not expect any communication with stakeholders beyond standard financial reporting over the next year.

The survey also found that tax management is increasingly complex, despite regulatory efforts to tackle this. EU tax transparency proposals will affect many respondent groups, and the proposed EU single corporate tax rulebook (BEFIT) is not expected to simplify compliance. Around two-thirds (65%) of respondents reported arrangements under EU Mandatory Disclosure Regime to one or more tax authorities in the EU since the directive came into force. The exact number (65%) expect to report in line with the EU public country-by-country reporting directive within the next three years but limited to where they are required to report. Just under half (47%) have considered the impact of the EU Unshell Directive proposal but have not made any changes yet. Meanwhile, 65% do not expect that BEFIT will simplify corporate tax compliance for their group in the EU.

Corporates are also considering environmental taxation and international remote work. More than half (54%) of respondents plan to change their policies or already have processes to accommodate international remote work. Over three-quarters (78%) expect the impact on their group of permanent establishment issues related to the increasing trend towards remote working to be small or moderate. Meanwhile, 39% have started to analyse the impact of environmental taxation on their business and operations.

The survey was conducted between 12 January and 7 February this year, with a target audience of tax directors and managers from multinational companies. 206 people from 28 countries responded to the 2023 survey.

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