Current global tax challenges and opportunities 

GREG WIEBE: I’m Greg Wiebe, Global Head of Tax for KPMG.

You know I’ve been in this business for 28 years and I’ve never seen anything like it. You look at the financial issues that Europe is facing, very profound. You look at the deficit that the US is facing. You look at our so-called Brick countries, the high-growth countries, China, growth has seemingly stalled. India, growth has seemingly stalled. Brazil isn’t growing as fast as it used to. So from a business perspective it’s a very interesting dynamic. That plays a huge part in tax with the tax policy, makers are dealing with, and how the tax authorities are dealing with issues in their countries.

So competition for investment is global. So if you look at what countries are trying to do, they should be trying to have a policy which attracts investment, attracts business opportunities, creates jobs for the long-term successive society. Where you’ve got a situation where you’re increasing taxes, or you’re getting too aggressive with taxpayers, you create a business environment which is not conducive to being a friendly place to make investments. There’s lots of countries around the world, especially in Asia Pacific, that have it figured out, that are being very competitive, that don’t have the same kind of social infrastructure and those costs that we see in Western Europe and places like Canada. So it’s going to be very interesting to see whether the model that you see in the so-called developed countries is in fact sustainable.

Tax authorities are being much more aggressive than they have been in the past. They’re being aggressive in about four or five different areas. One, they’re being aggressive in chasing down those particular opportunities and focusing where they think they can raise revenues. Secondly, they’re collaborating a lot more than they ever have in the past. So they’re sharing information, they’re working together, they’ve got that figured out. So they’re in a much better advantage than they used to be. From a third perspective, they’re not accepting any form of aggressive tax planning in their minds. Those days are done, so they’re going after it hard. And fourth, they’re the protectors of the revenue source for the country. So they also feel a need to be aggressive to chase down those revenue sources.

Ignoring the tax authorities for a second, what do tax directors also need to do in today’s environment? One, you’d better get used to the fact that there’s going to be pretty much full transparency going forward. Two, to the extent that you’ve got uncertain tax positions, they will likely be put on the table in real time, with tax authorities either if you’re in certain countries today, but it’s coming in the future. Third, there’s this whole issue of internal controls around tax. You need to make sure that you are comfortable and the organization overall is comfortable, that you’ve got the control mechanisms in place to make sure you’re paying the right amount of tax on time, in the right jurisdictions. And four, you need to think about what would happen if your tax issues hit Facebook, hit Twitter, hit the front page of the Wall Street Journal. Tax morality is something that’s here to stay, that’s not going away. Occupy movement, that whole trend, society is looking for people to say, “Is everyone doing their fair share?” Corporates and the tax they pay are clearly part of that debate, so I think a tax director needs to look at all the transactions in which they enter into, and the relationships they have with tax authorities, who kind of put it through a bit of a “fairness lens”. Are they proud with the way they are dealing with those issues as part of society? I think the tax directors that are forward-thinking are getting involved with these kind of issues within their organization, not only with themselves, but within the organization. Coming up with answers, creating tax codes of conduct, and creating an environment where perhaps they deal with these issues differently than they would have 10 years ago, when tax was just an expense to be managed.

It’s a different world today, and the world is changed forever. Where we were 10 years ago, when tax was an expense to be managed, those days are long gone. Whether it’s corporate social responsibility around tax, whether it’s tax governance, whether it’s enhanced transparency with tax authorities, whether it’s society looking at corporations to determine whether they’re paying the fair amount of tax, and whether they’re paying it in the right jurisdictions, these issues are not going to go away. So we’d better get used to it.