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Increased focus on transfer pricing clarity welcomed by business leaders
New research from the Grant Thornton International Business Report (IBR) reveals that business leaders are much more comfortable with levels of cross-border tax planning guidance compared with 12 months ago. Providing greater certainty around transfer pricing was high on the agenda at Davos and remains a key issue for the G20, but the good news for businesses is a number of exercises are underway to establish greater clarity and transparency.
The IBR reveals that the proportion of business leaders who would welcome more global co-operation and guidance from tax authorities on what is acceptable tax planning, even if this provided less opportunity to reduce tax liabilities across borders, has dropped 15 percentage points to 53%. Large declines were seen in North America (-16pp) and the EU (-15pp) as well as in BRIC (-15pp) and Asia-Pacific (-11pp) economies.
Francesca Lagerberg, global leader for tax services at Grant Thornton, commented: "It is almost a year since the level of corporation tax multinationals like Amazon, Apple, Google and Starbucks are paying hit the headlines. At that time, around two-thirds of business leaders were calling for clarity around the operation of specific tax rules, but twelve months on this has now dropped to just half. The question is why?
"I think we're looking at a combination of factors. Media attention has certainly died down over the past year and businesses may feel that social pressure has lessened. There may also be a sense among corporations that governments are prepared to offer populist rhetoric but actually change very little; after all, these large companies are massive contributors of jobs and economic growth.
"But perhaps the most important factor is that global leaders have listened to the concerns of citizens around the levels of tax paid by multinationals. A number of exercises are underway to establish greater transparency and clarity; for example, the OECD has been given a mandate by the G20 economies to prevent tax base erosion and profit shifting (BEPS) through reform at the global level."
The IBR also reveals that the vast majority of businesses leaders (64%) do not feel their country's tax laws and policies tax the correct people at the correct levels. A further 54% do not feel that their tax system encourages compliance.
Francesca Lagerberg added: "The results show there is a long way to go before business leaders feel truly comfortable with the tax planning guidance on offer. But I think the smartest business leaders have gone away, taken advice and properly insulated themselves against any negative impact on their brand. This makes sense: it would be a mistake to think of the tax avoidance issue as over; to see it merely as a 2013 phenomenon. There is still a spark there and a need remains for global clarification or this issue could boil over again.
"Twelve months ago, I made the point that the corporation tax debate had moved into the realms of morality and there was a need for governments to coordinate to get a better road map for businesses – that is why I welcome the G20 commitment to BEPS. There is certainly much to do: the BEPS plan is still in its infancy while taxation and the digital economy remain uneasy companions. The good news though is that progress is being made."
The IBR also asked business leaders for their strategic priorities in 2014; reducing their tax bill was cited by 35% of businesses and ranked tenth out of thirteen, well behind increasing productivity (70%), increasing market share (65%) and cutting costs (64%).
Explore the results on our data viz tool.
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Notes to editors
The Grant Thornton International Business Report (IBR) provides insight into the views and expectations of more than 12,500 businesses per year across 45 economies. This unique survey draws upon 22 years of trend data for most European participants and 11 years for many non-European economies. For more information, please visit: www.internationalbusinessreport.com
Data collection is managed by Grant Thornton's core research partner – Experian. Questionnaires are translated into local languages with each participating country having the option to ask a small number of country specific questions in addition to the core questionnaire. Fieldwork is undertaken on a quarterly basis. The research is carried out primarily by telephone.
IBR is a survey of both listed and privately held businesses. The data for this release are drawn from interviews with 3,500 chief executive officers, managing directors, chairmen or other senior executives from all industry sectors conducted between November and December 2013.
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