What is the most significant change to your region/jurisdiction's tax legislation in the past 12 months?
The implementation of Country by Country reporting along with new, or amended, VAT legislation have had significant impacts on tax matters in the Asia Pacific region.
What has been the most significant impact of that change?
The most significant impact of CbC reporting is the compliance requirement for companies in the region. Most companies underestimated the amount of time and complexity of complying with the rules. As such, most taxpayers in the region had to dedicate an unprecedented amount of resources to this.
The impact of the VAT implementation in India and Malaysia, along with significant reforms in China, have caused companies to re-examine their supply chains and IT systems. Similarly, governments have been overloaded with questions and requests to provide information, rulings. They have also had to build systems and processes to receive all new filings.
How do you anticipate that change impacting your work and the market moving forwards?
With the rapid growth in compliance demands, necessity to capture and report more data, and the speed of business model changes, Deloitte in Asia Pacific have had to build much more flexible and technology driven solutions. Our business is focused on being agile and efficient so that we can be industry leaders and role models in how to operate in this new era.
How has this changed the way you offer tax advice?
Historically, tax advice was centered around subject matter experts and local country experts that worked together to form an ecosystem of professional advice. Driven by Base Erosion and Profit Shifting (BEPS) and other government initiatives, tax is becoming far more integrated (by country and by type – such as indirect tax, income tax etc.) and required to be far more dynamic to respond to fast changing business models. As such, while Deloitte member firms in Asia Pacific retain the critical subject matter experts and local country experts we have complimented this with regional experts that excel at integrating everything together and seeing the broader picture. The new tax era needs professionals that specialize in regional tax and not just those that do it as they serve their clients in a traditional sense.
What potential other legislative changes are on the horizon that you think will have a big impact on your region/jurisdiction?
The impact of BEPS has not really been felt yet. CbC reports are just being filed which means that audit assessments will start in late 2018 and onwards. This will likely lead to significant disputes as countries aggressively try and expand their taxation base.
Moreover, as the rest of the BEPS action items are enacted into law, either via the Multilateral Instrument (MLI) or pursuant to unilateral action, taxpayer will have to respond in order to comply as well as fairly manage their tax affairs.
What are the potential outcomes that might occur if those changes are implemented?
The first outcome is that taxpayers will be faced with an unprecedented demand for more information to support audit defence. Moreover, taxpayers will need to better understand their global tax landscape and better understand their total tax position (not just income tax) so they can better manage their taxes and pay their "fair share".
Inevitably, to respond to this, taxpayers will need to make significant investments in technology. Managing the scale of information flow, ensuring consistency, freeing up limited people resources, and managing the tax risk will be too burdensome for traditional tax department models. Technology will not only provide efficiencies and cost savings for the tax departments, it may be the only solution to function going forward.
Do you think that change will have a positive effect on both your practice and the wider regional/jurisdictional market?
We have invested significantly in tax related technology and believe we are the practice leader in this area. In addition to tax technologies that provide systems integration, tax reporting functions and tax return preparation software, the utilization of artificial intelligence, robotic processing, and cognitive thinking will lead to the "smart" tax function of the future. As Deloitte in Asia Pacific envisions itself to lead the profession and be the practice of the future it will benefit substantially from these forward thinking investments.
How are issues surrounding the taxation of the digital economy affecting your jurisdiction?
The biggest affect to us is the requirement that our tax business have a strong technology understanding and background. Deloitte in Asia Pacific has been hiring a lot of technology experts so we can better understand how the digital economy is working, how digital platforms work and how we need to change our tax services to work within this new business dynamic. Not only does Deloitte in Asia Pacific need to be able to configure systems to comply with the tax laws, we are active in advising governments on the correct and fair policy regarding taxation of the digital economy.
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