- Half of senior tax executives expect the number and intensity of audits and disputes to rise during the next two years as authorities in dozens of countries step up coordination while enacting new global tax rules, EY found in a global survey.
- Tax officials worldwide are aligning with an agreement among 130 countries to overhaul global tax rules by setting a 15% minimum corporate tax. The accord is scheduled for implementation next year.
- “Governments used to view tax as a largely sovereign concern but now they’re aligning in an unprecedented way to bring about another wave of global tax reforms,” Marna Ricker, EY’s global vice chair for tax, said in a statement. They “are working together in the same cooperative spirit to enforce both existing tax laws and get ready to enforce changes to come.”
The Organization for Economic Cooperation and Development released final guidance in February on how more than 130 signatory countries should weave into domestic law the most sweeping revision of global tax rules in decades.
The OECD estimates that implementation of the changes will increase annual tax revenue worldwide by $220 billion.
The agreement “is establishing a modern global tax system that will level the playing field for U.S. businesses, while also protecting U.S. workers and American families,” Lily Batchelder, the Treasury Department’s assistant secretary for tax policy, said in February. The new rules aim to “end the race to the bottom in corporate tax rates.”
Congress has not approved the changes needed to bring U.S. laws in step with the global accord, exposing U.S. companies to the prospect of greater tax complexity, according to the Tax Foundation.
“If U.S. policy does not shift, U.S. companies will be caught in a confusing web of minimum taxes including Global Intangible Low-Tax Income (GILTI), the Base Erosion and Anti-Abuse Tax, the new Corporate Alternative Minimum tax from the Inflation Reduction Act and likely some portion of the global minimum tax rules,” the Tax Foundation said.
Tax executives holding senior titles such as “global tax director” or “vice president of tax” believe that the number of audits, and level of scrutiny, will surge 79% during the next two years compared with the previous two, EY found in a survey of 2,127 tax and finance executives in 47 jurisdictions.
Seventy percent of the senior executives said they lack a firm grip on their companies’ current tax disputes with authorities in various countries, EY said. They may face challenges responding “to new geopolitical, economic and tax policy changes that are adding unprecedented layers of tax risk that must be managed.”
Tax executives anticipate a surge in the number and intensity of audits during the next two years because of an increase in requests for information from tax authorities and in requirements for transparency and disclosure.
“Informal requests, however innocuous they appear, may well be a harbinger of future tax controversy,” Luis Coronado, EY’s global tax controversy leader, said in a statement.
Digital tax administration also ranked as a top enforcement concern, according to EY.
Tax executives flagged transfer pricing as the most likely point of dispute with authorities and identified tax incentives a distant second, EY said.