Tax Executives Say Heightened Call for Transparency is Chief Challenge Facing Multinationals: KPMG Survey

NEW YORK, May 10, 2011 /PRNewswire/ -- A majority of multinational company tax executives predict that a broadened international regulatory focus on increased transparency will be the most significant change their company can expect in international taxation over the next year, according to a survey by KPMG LLP, the U.S. audit, tax and advisory firm.

Polled about tax challenges their organizations face in the global business arena, the 100 tax executive respondents also revealed they expect an increased volume of tax examinations to continue around the world, given the recession and government budget deficits. The survey was conducted in connection with KPMG's annual International Tax Conference.

Rodney Lawrence, tax principal in charge of KPMG's International Corporate Services practice, said: "Our findings further confirm that corporate tax executives are feeling pressured by the increased compliance requirements and regulatory oversight globally, and they don't see a respite in sight soon.

"They also tell us frequently that finding the support and resources within their organizations to manage these increased demands is difficult in an environment where doing more with less is now the norm," he said.

Transparency to Change Most

Some 56 percent of survey respondents cited a broadened international approach to increased transparency on tax risk as the area that they expect would change the most over the next 12 months. One example of this new approach is the U.S. Internal Revenue Service's recently revised approach to disclosing uncertain tax positions (UTPs).  

Ranking second was changes to the taxation of intangible property to or from the United States, cited by 38 percent of those polled.

More Tax Exams Expected

On the topic of how they see tax risk changing in their organizations in the next year, 54 percent said they expected an increased volume of tax examinations around the globe, while 37 percent expect tax laws and administrative practices to continue to revise what had historically been acceptable corporate tax planning initiatives.  

When asked where they would most likely make an investment, if additional funds became available for their tax department over the next 12 months, more than half (51 percent) of those polled said they would invest in personnel resources, with 27 percent saying their investments would be outside of the United States and 24 percent saying inside the United States.

In other key survey findings:

• Of the tax proposals that have been floated publicly or addressed in President Obama's 2012 budget, almost one-third of respondents (31 percent) said that the prospect of expanding U.S. taxable income to include income earned overseas combined with disallowing related expenses would have the most dramatic effect on their companies' effective tax rate.
• Repatriation, capital redeployment (including leverage) or hedging were the aspects of tax planning that would be most affected by the FY2012 U.S. budget proposals, according to 33 percent of respondents.
• A majority of companies (32 percent) expect to devote increased tax resources to Asia, followed by Europe (18 percent), North America (15 percent) and Latin America (12 percent).
• Transfer pricing remains a priority of many tax authorities around the world, with the United States clearly the leader in transfer pricing enforcement, according to more than 60 percent of respondents.

"As the world continues to become smaller and more interconnected, multinational companies need to marshal the right global resources and collaborate across borders to stand out in the marketplace," Lawrence added. "Organizations that best understand the challenges they face and implement tax planning to address those challenges put themselves at a competitive advantage to seize the opportunities in front of them."  

The survey was conducted in connection with KPMG's 2011 International Tax Conference in March 2011. A total of 100 tax executives of multinational companies, who were invited to the conference, participated in the survey.

About KPMG LLP

KPMG LLP, the audit, tax and advisory firm (www.us.kpmg.com), is the U.S. member firm of KPMG International Cooperative ("KPMG International").  KPMG International's member firms have 138,000 professionals, including more than 7,900 partners, in 150 countries.

SOURCE KPMG LLP

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