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By Ben Stupples
In our tech-obsessed, globalized societies, with all-day television and Twitter, most of us are on the move during the week from the first bleep of our morning alarms until the last few hours of the day.
If you work for a multinational company, you may also be on the move between countries, and tax policy should have a more prominent role in allowing internationally mobile employees to work overseas, according to a Feb. 17 study from London-professional services firm Blick Rothenberg.
“The study encourages governments to use tax policy as a critical tool to make it easier and less complex for internationally mobile executives to work across borders,” it said. “Tax policy has a clear role to play in making it easier for employees to be mobile, building strong, sustainable growth.”
The research on global employee mobility, conducted with the University of Exeter’s Business School, comes amid a rising number of employees working overseas around the globe for multinational companies. Over the past decade, the number of employees working abroad has increased by around 25 percent, according to a December 2016 survey of human resources and tax or finance professionals by PwC.
By 2020, the professional services firm predicts further growth in that number of 50 percent.
Uncertainty over pensions and social security payments make internationally mobile employees, such as a multinational company director, unattractively complex, the study said. It added that dealing with different tax authorities over an employee’s income increases the risk of double taxation that the double tax agreements of the countries in question may not fully resolve.
“These are the people with knowledge and experience who make the world economy tick,” Dr. Gregory Morris, an author of the study and a University of Exeter Business School lecturer, told Bloomberg BNA in a Feb. 17 telephone interview. “What governments do on both a national and international basis, such as with the Group of Eight countries, is not always joined up—and IMEs are an instance of where that is apparent,” he added in reference to internationally mobile employees.
While it concedes that the existing rules are complex, the study recommended that tax advisors have a wide knowledge of how corporate, personal and employer taxes relate to each other.
This awareness is increasingly important in light of the OECD’s 15-point Base Erosion and Profit Shifting Action Plan to tackle multinational companies moving profits to low-tax jurisdictions.
BEPS Action 13 requires multinationals with annual turnover of more than 750 million euros ($796 million) to disclose information, including employee numbers, to tax authorities on a country-by-country basis. However, 31 percent of the companies surveyed by PwC for its December 2016 employee mobility report didn’t know how many of its employees work internationally.
“It is of paramount importance for employers to keep accurate records on the movement and obligations of internationally mobile employees,” the Feb. 17 survey said. “Whilst not always easy to do, it is particularly important when the host country adopts residence rules that are based on the number of days of physical presence or if there are concessions for short-term assignments.”
“If the world wants to be more globalized and people want to work across borders, international tax rules have to be a bit different,” Mark Abbs, a partner and head of expatriate tax services at Blick Rothenberg, told Bloomberg BNA in a Feb. 17 interview. “You now have a huge choice where you can go” abroad, “and that decision will partly be based on the calculation of net tax pay.”
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