More than half of multinationals change tax plans over Trump

New research shows companies are delaying or altering plans ahead of US tax reforms

More than half of multinational companies have changed their tax plans due to US president Donald Trump’s proposed tax reforms, according to new research.

Taxand, a global tax adviser, published figures on Thursday showing that 55 per cent of chief financial officers and tax directors have altered their tax plans, or delayed decisions, due to the reforms.

Taxand surveyed individuals from across Europe, Asia and the Americas at its recent global conference in Frankfurt to provide a view on the current tax landscape across the world and examine how multinational companies view the current pressures.

Martin Phelan, a partner with William Fry Tax, noted that “Ireland probably has the most US capital investment in Europe” and that most US companies use Ireland or the UK as their entry to the European market. He suggested the difficulty of that is that Ireland is “effectively a victim” of tax decisions being made in the US.

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Ireland appears to be particularly vulnerable, as it is an inbound tax jurisdiction. Mr Phelan added that tax decision-making in Ireland is “driven by external factors which aren’t necessarily under Ireland’s control.

Taxand managing director Tim Wach said it was "unsurprising" that chief financial officers and tax directors were "pausing for thought or altering plans".

“As we await more thorough proposals, US multinationals are somewhat scrambling in the dark, and are rightly concerned about potential impacts from what may prove to be dramatic tax reform, if Republican plans for a border-adjusted cash flow tax are pursued, or if the much less ambitious Trump proposals are pursued,” he said.

Aggressive tax audits

The poll also found that more than two-thirds believe tax auditors have been more aggressive in their activities in the past year.

A quarter said there had been no change and just 6 per cent said auditors had been less aggressive. This is compared to 77 per cent who said last year they had seen an increase in audits, and 60 per cent in 2015.

When asked about the impact of increased tax transparency, 88 per cent of chief financial officers and tax directors said they were concerned about the potential exposure of the information provided to meet the proposed country-by-country reporting standards. That was down from 91 per cent last year.

In comparison, just 12 per cent said they weren’t concerned. In addition, 96 per cent of respondents said they believed increasing global tax transparency will increase the cost of compliance, up from 89 per cent last year.

Mr Wach said taxpayers are under “regular and increasing scrutiny” to provide greater financial information to tax authorities.

“Countries across the globe are embracing various new methods of enhancing transparency and facilitating the exchange of information, which brings significant challenges for multinationals to ensure they remain compliant,” he said.

“Our survey highlights how tax authorities have ramped up their information requirements and requests as tax planning comes increasingly under the spotlight. The reputational impacts of increased transparency clearly can’t be ignored.

“Public scrutiny can have significant reputational risk for corporates that fail to respond robustly to questions over their tax affairs. Firms must ensure, when deciding their tax policy, that they are willing to stand behind any decision.”

Colin Gleeson

Colin Gleeson

Colin Gleeson is an Irish Times reporter

Peter Hamilton

Peter Hamilton

Peter Hamilton is a contributor to The Irish Times specialising in business