The proportion of tax executives involved in a dispute over taxation rose to 55% in late 2020 from 40% the prior year as governments worldwide try to revive tax revenues following pandemic-induced losses, according to a BDO survey.
Among the strategies planned by tax executives this year, 43% plan supply chain restructuring, 43% intend to outsource specialized tax work and 38% plan to appeal assessed property taxes, according to the survey of 150 tax executives at U.S. companies with revenues ranging from $100 million to $3 billion.
- Ninety-two percent of respondents said trade conflicts, including Brexit and U.S.-China tensions, have had a moderate or high impact on their businesses, while another 92% expect an increase in the U.S. federal corporate tax rate.
A White House plan to raise the corporate income tax rate to 28% from 21% would increase the federal-state combined tax rate to 32.34% — the highest level in the Organization for Economic Cooperation and Development (OECD), according to analysis by the Tax Foundation.
The higher corporate tax would undermine long-run economic output by 0.8%, eliminate 159,000 jobs and reduce wages by 0.7%, while increasing the cost of investment and harming U.S. competitiveness, the Tax Foundation said.
U.S. corporations currently face a 21% federal statutory tax rate and an average state statutory rate of about 6%, for a combined rate of 25.8%, according to the Tax Foundation.
New revenue would go toward economic reconstruction and debt reduction. The U.S. fiscal outlook worsened last year following $3.5 trillion in pandemic rescue spending. Congress is considering a White House proposal for $1.9 trillion in additional rescue aid.
The pandemic has prompted some positive changes at businesses, with 49% of respondents seeing a bigger role for tax executives as strategic partners, 46% noting an improved workforce culture and more unity and 45% reporting faster decision-making.
"The events of 2020 proved that involving the tax department in business strategy is a key factor in increasing resilience and agility," Matthew Becker, BDO’s national managing partner of tax, said in a statement. "From conserving cash to helping businesses avoid new liabilities, the importance and value of the tax function has never been clearer."
When describing their use of tax technology, 57% of respondents said they "in-source" vendors on data design, technology selection and other facets while an internal team performs most of the work, the survey found.
Thirty-four percent "co-source" tax services, with vendors designing processes and performing tax compliance while using digital platforms to collaborate with internal teams, the survey said. Nine percent of respondents completely rely on vendors for tax services.