The Tax Management Transfer Pricing Report ™ provides news and analysis on U.S. and international governments’ tax policies regarding intercompany transfer pricing.
By Ben Stupples
Companies face a huge rollout of new tax legislation worldwide in 2018, increasing the risk of “unpleasant surprises” for them in the future, according to one of the largest accounting firms.
This year will bring a “tsunami of changes to domestic legislation of many countries,” EY said in an April 23 report on the outlook for global tax policy for 2018. “Putting in place proactive processes to monitor, assess, quantify and comply with the vast range of changes forecast to be made in 2018 and beyond will be critical if companies wish to avoid unpleasant surprises.”
New tax laws across multiple jurisdictions will test global companies’ compliance operations, and may alter the way governments address the taxation of these businesses’ cross-border activities.
In its report, EY cited six countries carrying out “comprehensive” tax reform in 2018: the U.S., Argentina, Belgium, Poland, South Korea, and Turkey.
Many of the countries’ reforms are derived from the OECD’s 15-action project to prevent tax avoidance among multinational businesses, the firm added.
Signed into law by U.S. President Donald Trump in December, the 2017 tax act ( Pub. L. No. 115-97) is already affecting businesses, with Republican lawmakers insisting it will provide a boost to the American economy.
Apple Inc. said in January it expects repatriation tax bills of about $38 billion. Overall, the United Nations said in a Feb. 5 special report on U.S. tax reform that the new law may lead to the repatriation of as much as $2 trillion, cutting U.S. companies’ foreign direct investment.
Among the U.S. measures, EY singled out the country’s new efforts to target tax avoidance as one that will have a significant impact on businesses.
The base erosion and anti-abuse tax (BEAT) restricts how much multinationals can use cross-border payments to shift profits to low-taxed jurisdictions. In its report, EY said other countries may take similar steps to—or retaliate against—the BEAT and other anti-abuse measures in the U.K. and Australia.
Due to the BEAT, and the U.K. and Australia’s diverted profits taxes, “there seems to be a growing risk of double taxation for companies,” the report said. “All in all, it is hard to conclude that the current developments are fostering trade and economic growth and preventing double taxation.”
(Updated to reflect Apple expects to pay about $38 billion in tax after repatriating profits.)
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