Survey: Business leaders would pay more tax for greater clarity

Three-quarters of global business leaders would accept higher taxes in exchange for greater clarity on acceptable tax planning, the Grant Thornton International Business Report has found.

The survey of 2,580 businesses in 35 countries noted a significant increase from the last time the question was asked – last year – when 53 percent of respondents gave the same answer.

Francesca Lagerberg, global leader for tax services at Grant Thornton said the level of taxation paid by businesses has become a very public and emotive issue.

“But setting emotion to one side, businesses have a responsibility to their investors and shareholders to keep costs down – within the existing regulatory parameters. Despite this, our IBR survey clearly shows that the vast majority would actually support paying more in tax in exchange for clearer guidance from tax authorities on what is acceptable tax planning,” she said.

“The ball is very firmly in their court to provide the clear lines that businesses are requesting. The results provide more evidence that clarity is needed in the complex world of cross border tax transactions.”

The countries most in need of greater tax clarity, according to the survey, are India, South Africa, the U.K. and the U.S., where between 83 percent and 95 percent of the respondents said they would pay more taxes if there was greater certainty on tax planning rules.

Few respondents expect that a global agreement on the Organisation for Economic Co-operation and Development’s Base Erosion and Profit Shifting project – which seeks to harmonize the application of international tax standards – will be reached anytime soon.

Only 23 percent of the survey respondents believe that the OECD’s plans on global tax improvement would be successfully implemented. This is down from 24 percent a year earlier.

But the majority of business leaders (71 percent) would like to see their governments take unilateral action to combat the loss of tax revenue in their jurisdiction. The support for local action is strongest in India (95 percent), the U.S. (82 percent), the U.K. (79 percent), China (67 percent) and Ireland (64 percent).

“Businesses may be pessimistic on the chances of a global agreement – the Doha Round and climate change negotiations have taught us that these things take time. However, the work being undertaken by the OECD on tax planning should go some way to allaying business concerns by moving this debate away from talk to action,” Ms. Lagerberg said.

The OECD is set to finalize its recommendations this year.

“International tax standards clearly need to be stripped down and rebuilt for the world we live in today,” Ms. Lagerberg said. “The existing legislation is creaking at the seams in an increasingly interconnected, digital world in which the definition of a ‘border’ is looking archaic. The research is showing that businesses are asking for more help to enable them to navigate the new challenges of a digital economy.”