SOURCE: Deloitte China

Deloitte China

April 25, 2017 03:30 ET

Deloitte survey highlights tax predictability as key to attracting business in Asia Pacific

2017 report reveals predictability and consistency are desired amidst increased uncertainty in Asia Pacific's tax landscape

HONG KONG, CHINA--(Marketwired - Apr 25, 2017) - Predictability and consistency of tax regimes is the most important factor in business decision-making, according to Deloitte, who today released the third edition of their Asia Pacific Tax Complexity Survey report. However, the report shows that in the current uncertain tax landscape, tax regimes remain complex and predictability and consistency is elusive. This is especially the case in China and India, who have the most complicated requirements of all jurisdictions in Asia Pacific, according to survey respondents. In 2010, complexity was the most important factor for surveyed tax executives in the region, and in 2014, consistency was most important.

Alan Tsoi, Deputy Regional Managing Director and Tax & Legal Leader, Deloitte Asia Pacific commented, "the progression from complexity to consistency to predictability may be explained by tax regimes in the region maturing over the past 10 years. As tax regimes have matured, tax complexity has improved and corporates now seek tax predictability to ensure smooth tax management. There is currently a general climate of uncertainty where Governments are trying to balance the tension between creating an environment that attracts investment whilst at the same time protecting their tax bases and raising needed tax revenues, which could also be contributing to a sense of unpredictability in regional tax regimes."

Tax regimes in larger countries have increased complexity
As the external environment becomes more unpredictable, companies may be acting more cautiously when managing tax affairs. Companies see that the largest developing economies -- China, India and Indonesia -- still have much progress to make before they can meet investors' expectations in this regard. Japan, Australia, Indonesia and South Korea also rank highly in terms of tax complexity. In contrast, Hong Kong, Singapore, Macau and Mauritius have the simplest requirements, which is not surprising given their relatively straightforward tax regimes.

"Some of the reforms needed to improve tax predictability and consistency include improving the training of tax officials and increasing public consultation on tax policy. However, there is added complication with the implementation of OECD's Base Erosion Profit Shift (BEPS) Actions taking place at the moment, with governments in many countries updating existing rules and developing new rules. Companies that trade or invest in the countries along the "One Belt One Road" will need to pay extra attention in this regard," said Pauline Zhang, Vice Chairman, Tax Partner, Deloitte China.

BEPS implementation is a top priority for governments and companies
It is widely accepted that BEPS will drive significant change in the global tax landscape as governments introduce new policies in line with global standards. Multinationals are finding themselves preparing for this impending change by changing their business models or adapting their resources so they are able to comply with enhanced reporting requirements.

Alan Tsoi, Deputy Regional Managing Director and Lead Partner Tax & Legal, Deloitte Asia Pacific explained, "BEPS implementation is becoming top of mind for tax professionals with regards to tax reform, and how each jurisdiction approaches BEPS is of concern for finance and tax executives. It is widely accepted that BEPS changes are a positive sign for tax development in the region, but many countries in Asia Pacific need to update and modernize their tax regimes to ensure consistency of approaches, which will ultimately lead to greater tax predictability, a current concern for businesses operating in the region."

Company tax strategies becoming increasingly conservative
In light of the uncertain tax landscape, companies are less likely to pursue aggressive tax strategies than in the past. Three-quarters of respondents indicated they would not enter into a tax planning strategy if perceived by some to be aggressive. Only 40 percent of respondents in 2014 expressed the same sentiment. In the three years since the last Deloitte survey, the social responsibility of companies as taxpayers has come under close public scrutiny, particularly as some multinational enterprises have been embroiled in controversy in several larger jurisdictions. The enormous potential for detrimental reputational risk has prompted company executives and boards of directors to acknowledge the need to consider such risk when determining the company's tax strategy.

The report surveyed over 300 financial and tax executives on their views of the current and anticipated tax environment of 20 jurisdictions across Asia Pacific. For more analysis and details on Shifting sands: risk and reform in uncertain times, please visit Deloitte.com.

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Deloitte provides audit, consulting, financial advisory, risk advisory, tax and related services to public and private clients spanning multiple industries. Deloitte serves four out of five Fortune Global 500® companies through a globally connected network of member firms in more than 150 countries bringing world-class capabilities, insights, and high-quality service to address clients' most complex business challenges. To learn more about how Deloitte's approximately 244,400 professionals make an impact that matters, please connect with us on Facebook, LinkedIn, or Twitter.

About Deloitte China
The Deloitte brand first came to China in 1917 when a Deloitte office was opened in Shanghai. Now the Deloitte China network of firms, backed by the global Deloitte network, deliver a full range of audit, consulting, financial advisory, risk advisory and tax services to local, multinational and growth enterprise clients in China. We have considerable experience in China and have been a significant contributor to the development of China's accounting standards, taxation system and local professional accountants. To learn more about how Deloitte makes an impact that matters in the China marketplace, please connect with our Deloitte China social media platforms via www2.deloitte.com/cn/en/social-media.

This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively the "Deloitte Network") is by means of this communication, rendering professional advice or services. None of the Deloitte Network shall be responsible for any loss whatsoever sustained by any person who relies on this communication.

© 2017. For information, contact Deloitte China.

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