The potential for U.S. federal business tax reform and the rigorous pursuit of transfer pricing adjustments by foreign countries are the top global tax concerns facing senior U.S. tax professionals, according to a survey issued today by U.S. audit, tax and advisory firm KPMG LLP in connection with its 2013 U.S. Tax Summit this week in Orlando, Fla.
“It’s clear from our survey that tax department leaders are focused on how to manage in the persistent and active regulatory environment in transfer pricing and are also devoting increasing attention to how changes in U.S. tax legislation will affect their global operational decisions,” said Jeffrey C. LeSage, vice chairman of KPMG’s U.S. Tax practice. “We believe that these and other key tax issues will present U.S. companies with challenges and opportunities as the global business landscape continues to evolve.”
The survey of almost 250 U.S. senior tax professionals -- conducted prior to KPMG’s 2013 U.S. Tax Summit, taking place June 3-5 -- also polled companies on tax cloud initiatives, the tax impact of import and export activities, sustainability, and legislation on taxation of Internet sales.
According to the survey, 26 percent cited the pursuit of transfer pricing adjustments as their greatest global tax concern, while 24 percent pointed to the potential for U.S. federal business tax reform. Other top concerns included the increasing number of countries aggressively pursuing ‘permanent establishment’ as an approach to asserting a jurisdiction’s taxing authority and the lack of a uniform approach by countries (15 percent) and challenges related to obtaining meaningful data that enables a company to project its annual effective tax rate with confidence (12 percent).
Tax Not Adequately Involved With Cloud
The survey also revealed that just 12 percent of tax departments are involved in early-stage discussions around cloud-related business transformation and almost one-third (30 percent) said when it comes to decisions on cloud-enabled business transformation their department is still being left out of the decision-making process.
“The feedback related to cloud business activities is particularly eye-catching,” said Laura Newinski, national managing partner-Tax at KPMG, “because we’ve seen that many companies that leave tax departments out of early cloud-related discussions also leave money on the table when it comes to the ultimate return-on-investment (ROI) of their cloud projects.”
In another interesting finding, 4 in 10 tax executives had not yet evaluated the potential impact of the Marketplace Fairness Act of 2013, despite the Senate’s recent passage of the bill, which would allow states to require online and other out-of-state merchants to collect and remit sales and use taxes on products and services they sell. Only 5 percent said they had evaluated the legislation and believe it will have a significant impact.
“Companies that may be affected by the potential changes to the taxation of online and remote sales need to pay close attention to the legislation and new tax compliance obligations that may be imposed on them,” KPMG’s LeSage said. “If passed, the bill could be the most significant game changer in U.S. state and local tax in years.”
Legislative & Regulatory Impact on Trade & Customs
When asked what new regulatory, legislative or policy development has had the most impact on their company’s global import and export activities, nearly one in four respondents (21 percent) cited aggressive enforcement of customs valuation laws associated with related party pricing and the ‘dutiability’ of royalties.
And with regard to tax’s role in a company’s sustainability strategy, more than one-third (37 percent) of respondents report that they have no significant role as a tax executive in implementing that strategy for their companies. Rather, 28 percent said their role involved strategic implementation to managing the overall after-tax return of sustainability projects.
“As all of these issues spotlight, the challenge for tax departments in the future will be to stay out in front of developments and make the case that their insights can add value to their company’s overall business and bottom line in light of rapidly evolving needs,” said LeSage.
The KPMG “pulse” survey, conducted May 16-23, reflects the responses of 242 senior tax professionals including tax directors, tax managers, vice presidents of tax, chief tax officers and tax analysts.
About KPMG LLP
KPMG LLP, the audit, tax and advisory firm (www.us.kpmg.com), is the U.S. member firm of
KPMG International Cooperative ("KPMG International"). KPMG International’s member firms have 152,000 professionals, including more than 8,600 partners, in 156 countries.
Contact: Robert Nihen/Bridget Carroll