Anticipate, prepare for and lead change

The consultation request - when a company's tax strategy is in the end actually published and what currently proposed is in force - should be seen in my view as a 'tax trend beyond UK' also when this is read in combination with other (e.g. OECD) initiatives. Let me explain.

Based on the recent UK consultation request it is proposed that large businesses publish their company's tax strategy, the executive signs off of the tax strategy and the business will practice the voluntary code of conduct as discussed earlier in a previous article "Improving large business compliance".

The impact goes beyond the UK when the company's tax strategy is actually published on either the business website or in the annual report. Some quotes from consultation document:

• The strategy should set out the business’s attitude to tax risk, its appetite for tax planning and its approach to its relationship with HMRC.
• It may also cover the governance framework describing the way a business takes decisions on taxation. The research found that “businesses with a greater appetite for risk tend[ed] not to have written (or published) tax strategies, while those with lower risk-appetite tended to have more formalised strategies.
• Businesses will be required to inform HMRC as and when it is published.
• It also shows us that increased scrutiny of tax strategy by a business’s Board actively discourages aggressive tax planning, with businesses stating that tax was now of “particular concern for senior management.
• Building on this, the proposal is to include a requirement to have a named individual at Executive Board level who is responsible for owning and signing off the tax strategy. This will further encourage bringing responsibility for tax into the boardroom and align with the best practice many businesses already exhibit.
• The proposed requirement for Board-level oversight echoes the existing Senior Accounting Officer (SAO) regime, which provides assurance that a business has adequate tax accounting arrangements in place. The SAO regime does not, however, extend to a business’s tax strategy. It is our intention that this proposal is kept apart from the existing SAO regime.

More efficient and effective tax inspections

The SAF-T standard, originally created also by the OECD, is intended to give tax authorities easy access to the relevant data in an easily readable format. This leads to much more efficient and effective tax inspections.

Certain countries have already implemented Standard Audit File for Tax Purposes submission. In Europe: Austria, France, Luxembourg and Portugal.

In line with SAF-T obligations, from 1 January 2016 registered businesses in the Czech Republic will be required to file a new VAT return which will have details of each taxable transaction made with other Czech registered business. The Slovak Republic and Hungary have also introduced similar VAT filing requirements in order to prevent VAT fraud.

• Spain’s plans for VAT Immediate Supply of Information (SII)
• New VAT control ledger in Czech Republic
• Mexico: Everything you need to know about electronic accounting records

Other countries such as Netherlands still have their own local methods, but that might change soon.

The Dutch tax authorities announced on May 19, 2015 that 5,000 of its 30,000 employees will lose their current job, while at the same time 1,500 specialized data analysts will be hired as tax returns will be automatically assessed via data analysis. The world - how we know it - is changing fast.

 "A pending reorganization at the Dutch tax authority Belastingdienst will likely result in the elimination of 4,000 to 5,000 jobs. The staff cuts are due to improvements to computer systems that reduced the need for many spot checks done by workers, reports broadcaster NOS. Improvements to information technology infrastructure will lead to better data analysis, and thus more accurate tax assessments, sources told NOS. This should not only reduce the amount of tax evasion, but also increase the amount of tax revenue received by anywhere from hundreds of millions to billions of euros every year."

Initiatives and views

• Final Reports BEPS
• State aid or not - what about 'reputational tax risks'
• Tax position exceeds external auditor's materiality
• Examples of public Fiscal Transparency statements
• The Indirect tax impact of BEPS
• Mandatory electronic audit files a worldwide trend
• Tax Compliance Consultation - UK
• UK’s Large Business Compliance Consultation: TEI’s comments
• iBestuur: Belastingdienst zoekt heil in datalaag