Tax systems not keeping pace with changing business models

Nov 01 2013, 20:45 IST
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SummaryAs the public looks to businesses to ‘do the right thing’, expectations for more transparency are increasing

Whether you are a policy maker, business leader, politician, journalist, tax authority or just a regular citizen, the issue of tax is probably high on your agenda.

Over the past few years, there has been a fundamental shift in the way that people view tax. Today, tax and the issue of paying your fair share is one of the most prominent areas being scrutinised by governments, the general public and, to a great extent, the media. Just like corporate responsibility and environmental issues, significant brand damage can occur if there is a perception that a company’s tax affairs are overly aggressive or ‘unfair’.

As the public looks to businesses to ‘do the right thing’, expectations for more transparency are increasing. Coverage of the inadequacies of Greek revenue collection, public demonstrations in the UK, renewed scrutiny from US government committees and the former French Budget Minister’s reported evasion activities have kept taxation in the news spotlight. And while these may just be flashpoints, they clearly demonstrate that the scrutiny on tax transparency and morality is not going away.

Tax on the global agenda

While the debate has tended to focus on corporations and high net worth individuals, the reality is that governments, tax authorities and policy makers must also shoulder some of the responsibility. In part, this is because current tax systems have not kept up to date with changes in business models and practices. At the same time, it must also be recognised that many countries use their tax systems to compete for investment dollars and jobs, and to benefit the foreign activity of their own multinationals.

Thankfully, there are a significant number of international meetings involving the EU, OECD, G8 and G20 where tax is on the agenda. Some are likely to focus on evasion, others on international tax rules. Regardless, business leaders can expect to see a myriad of scoping documents, discussion papers and communiqués at the country, secretariat and forum levels.

The fact of the matter is that, with respect to tax, businesses need an environment that offers regulatory stability and certainty. To this end, KPMG member firms around the world applaud and support the current and future work of the OECD.

Much good work has already been done on the global stage over the past few decades to address any number of tax issues. But, now more than ever, it is essential that collaboration between countries

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