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CIT Reform, BEPS Top Concerns For US Tax Directors

by Mike Godfrey,, Washington

11 March 2016

With eight months before the 2016 presidential election, one in five public sector tax directors say that planning for reform under the next president is their primary tax concern, according to BDO's second annual Tax Outlook Survey.

When asked if the outcome of the presidential election will or will not result in significant tax code changes, 77 percent of public company tax directors indicated they believe tax reform will pass if the next president is a Republican. 33 percent believe tax reform will pass if the next president is a Democrat.

Topping tax directors' reform wish lists is reducing the corporate tax rate (41 percent), followed by a shift to a territorial tax system (20 percent), and a simplified tax code (19 percent). Just two percent cite lowering the tax burden on capital gains as a high priority.

Matthew Becker, Partner in the National Tax Practice at BDO USA, LLP, said: "The real challenge for businesses in an election year is planning for uncertainty. The recent vacancy on the Supreme Court has only heightened the partisan divide; however, the compromise to make permanent a number of important tax extenders reached at the end of last year may portend additional opportunities to find common ground."

Major tax reform efforts on the international stage are also a source of anxiety for tax directors as they look to optimize global growth, with 55 percent saying they plan to enter or expand international markets in 2016, according to BDO.

BDO highlighted that, now the OECD has finalized its recommendations under the Base Erosion and Profit Shifting (BEPS) initiative, tax directors will need to prepare their organizations to meet new global tax rules and requirements. Nearly half (48 percent) of respondents said international tax planning, including BEPS, is their biggest tax issue for 2016. Of the 15 items listed in the BEPS Action Plan, the recommendations on transfer pricing (Action Items 8, 9, 10, and 13) pose the greatest concern, according to BDO, with these recommendations being identified as the most troublesome by 54 percent of survey participants. 81 percent of tax directors say their organization's current tax strategy includes transfer pricing mechanisms.

BEPS has reporting implications as early as this year, with country-by-country reporting rules (Action Item 13) taking effect for tax years starting on or after January 1, 2016. Most tax directors (87 percent) said they expect to have completed the country-by-country analysis by the December 31, 2017, deadline for the first report.

While much of the BEPS agenda still awaits implementation, more than half (52 percent) of respondents are proactively taking steps based on the Action Item drafts. Another third are waiting for individual countries to implement BEPS measures before taking any action, says the survey.

"BEPS is one of the most ambitious reform initiatives ever undertaken on an international scale," said Paul Heiselmann, National Managing Partner of Specialized Tax Services at BDO USA, LLP. "Between the election in November and BEPS implementation in the US and overseas, the tax regulatory and reporting environment is in a state of major flux. The BEPS recommendations may be applied differently by different countries, which is creating more uncertainty and confusion for multinational businesses. As we wait to see how implementation unfolds, businesses should closely monitor the adoption of BEPS to determine the potential tax consequences and review their internal compliance controls and procedures."

TAGS: environment | compliance | tax | business | public sector | tax planning | transfer pricing | United States | tax reform | Tax | BEPS

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