In its 35th Annual International Tax Conference, EY declared its new tax survey results. The survey showed that companies have been experiencing more audits and aggressive tax enforcement from all over the world.
The numbers from the EY survey
Twenty-three percent of the tax directors mentioned that they are under audit in 15 countries and more. This is a 6% increase from last year and a 10% increase from 2014. Fifty-six percent mentioned that some countries are getting subjected to an audit, where a year ago it was only 49%. Seventy-two percent also said that the enforcement attitude of the foreign tax authorities are now more aggressive with just 66% saying that from last year.
Forty-nine percent of the respondents are now seeing the tax authorities raising audit issues from BEPS focus areas, a 16% jump year-over-year. Transfer pricing was selected by 60% as the main focus area of an audit issue. Fifty-four percent mentioned that it is the top BEPS area that affect them due to the changes in reporting requirements.
Sixty-seven percent also selected transfer pricing as the top issue that stems from challenges in the foreign country audits. Transfer pricing relating to tangible goods or services was chosen by 37% while 30% chose transfer pricing relating to intellectual property charges.
Transfer pricing and country-by-country reporting were tied as those BEPS areas having the biggest impact on the respondents’ companies, each chosen by 29%.
BEPS Action 13
BEPS Action 13 was where the trend in the year’s survey revolved on. When the respondents were asked to choose all ways the local file framework or master file for transfer pricing documentation influenced their method to transfer pricing documentation, these are just some of the information revealed.
- 67% said it requires comprehensive local file reports
- 56% said it requires qualitative and quantitative information
- 43% said it requires all material inter-company agreements to be included
As more audits and aggressive tax enforcements are experienced from all over the world, an audit protection insurance is important for these companies. It comes as a way to adequately defend the audit cases, to dispute undesirable results and to appeal the case.