UK’s Autumn Statement 2015 has been announced, with several measures aimed at changing corporate tax behavior and promoting transparency with the objective to achieve a modern and fairer tax system. A link to the Statement is provided for reference:
- A 60% penalty of tax due for successful general anti-abuse rule (GAAR) cases, to be implemented in 2016. The revenue impact of this measure is highly uncertain, as it is also meant to be an incentive to change corporate tax behavior.
- A desire to be to the most digitally advanced tax administration in the world.
- New criminal offense for corporates failing to prevent tax evasion; failure to prevent their agents from criminally facilitating tax evasion by an individual or entity.
- Hybrid mismatch rules to be effective 1/1/2017, following the OECD’s BEPS Guidelines.
- Corporates to publish tax strategies as they relate to, or affect, UK taxation.
- Cooperative compliance framework.
- “Special measures” regime to tackle businesses that persistently engage in aggressive tax planning.
A carrot, stick and transparency approach is contained within the Statement, and thus important to follow as other countries will surely review UK’s leading initiatives to gauge impact on their respective economy. The GAAR related penalty, which is inherently subjective, will be dictated in some fashion by HMRC’s aggressiveness to assess GAAR and a willingness to pursue it through the respective appeal avenues or court. The tax strategy initiative will also be interesting to monitor as to its breadth and potential impact upon a company’s risk rating.
Cooperative compliance is an initiative that is being used more regularly to further efforts by tax administrations for tax transparency. (Refer to 13 June, 2013 post: OECD: A Framework for Co-operative Compliance)
The referenced PwC Tax Policy Bulletin highlights the use of this popular technique for Global Mobility compliance and Best Practices. The Bulletin provides a primer for processes of global mobility compliance and integration of a cooperative compliance approach, including the relevant benefits and risks.
Click to access pwc-cooperative-compliance-global-mobility-tax-policy.pdf
- Many countries have the potential to immediately negotiate an agreement to streamline mobile employee compliance.
- There is an opportunity to minimize/control risks due to global talent shifts, short-term business travelers / assignees, targeted tax audits, administrative complexity, Permanent Establishment (PE) exposure, etc.
- Tax control framework methodologies should be in place for review by tax authorities to review internal processes.
- This initiative should be in synergy with the global / regional / country tax strategy for alignment.
This important initiative should be supported by tax expertise for the global mobility function via internal and/or external resources. Accordingly, the impetus of tax transparency, complexity and corporate accountability may provide perfect timing to review the organizational structure of the global mobility function and inherent tax expertise provided, resulting in a Best Practice methodology as part of the global tax risk framework.