The majority of tax advisers expect corporate tax rates to remain relatively unchanged over the next three years, according to research by RSM, the seventh largest global network of independent audit, tax and advisory firms. This is in spite of global tax reform led by the OECD aimed at targeting tax avoidance by multinational corporations.
RSM analysed the views of its tax partners from 54 countries in its report, ‘The Evolution of Tax - a 50 year perspective’. Nearly three quarters (72%) of the network’s tax advisers expect their country’s corporate rates to stay about the same, while a fifth expect a decline and just 8% forecast a marginal increase.
Advisers in Latin America, Middle East and North Africa (MENA) and Sub-Saharan Africa expect the least change to their corporate tax rates in the next three years (80%). In the G7, the US, Japan and Italy expect their corporate tax rates to reduce by one to five percentage points, whereas experts in Germany, France and the UK anticipate their corporate tax rates to remain about the same. Advisers in the BRIC economies all expect their rates to see little change.
Tax experts recognise that there will be huge challenges in implementing the OECD’s tax proposals. There is concern about the practicalities that governments will face because tax policy is a key component of their economic management and the OECD’s proposals involve giving up some of that national control in favour of a more global policy outcome. Detailed negotiations between countries on double tax agreements is also expected be difficult.
Companies will be burdened by issues such as the requirement to disclose their transfer pricing policies in far greater detail. They will also be challenged by proposals to neutralise the impact of hybrid tax mismatch arrangements, where double deductions are obtained for the same amount, for instance, which require detailed cross-border understanding and agreement between countries.
Jean Stephens, Chief Executive Officer of RSM International, comments: “The global tax system was built for an industrial age dominated by western powers and is no longer fit for purpose in the increasingly globalised, internet-driven, economy. We applaud the OECD’s unprecedented reform objectives and its inclusion of developing economies in its proposals, but it is clear that agreement and implementation will be very tough for governments and companies across the world.”
Recognising the difficulty of negotiating both bilateral and multinational agreements, a third of RSM’s tax experts expect there to be no imminent change in their country to double tax treaties - agreements between jurisdictions which enable companies to avoid being taxed twice when operating outside their main domicile. However, most European experts, and those in China and India, do anticipate an increase in the number of their treaties.
Rob Mander, Head of the International Tax Leadership Group at RSM International, said: “While we are not expecting to see much change to corporate tax rates across the world, governments must be careful that their responses to the revised global tax infrastructure do not remove incentives to innovate, invest in and grow businesses. Companies need to understand in detail the impact of the OECD’s proposals and plan accordingly, and this applies to businesses of all sizes, not just multinationals.”
While governments are also scrutinising tax avoidance among the wealthy, RSM’s tax experts do not expect upper income tax rates to change substantially over the next three years. Over two thirds of RSM’s partners (68%) anticipate their country’s rate will remain static and only 13% expect an increase. Of the G7 and BRIC economies, only Germany expects an increased tax rate for high earners.
 Canada not included in G7 analysis as RSM does not have a member firm in the country.