What is the most significant change to your region/jurisdiction's tax legislation in the past 12 months?
While Latin American and Caribbean countries do not share similar approaches to tax legislation (for example, Argentina just had significant tax reform at the end of 2017, and some countries did not experience any substantive changes to their tax legislation), we have seen a common trend across the region for real-time or near real-time reporting requirements as well as OECD-driven developments in areas such as base erosion and transfer pricing reporting. These changes call for heightened transparency on a real-time basis. In response, organizations are increasingly looking to automate their tax compliance functions. US tax reform has also had a significant impact on how subsidiaries of US multinational corporations operate and are structured in the region.
What has been the most significant impact of that change?
Organizations are turning to digital technologies to automate their tax systems via consistent processes to meet increased reporting and compliance obligations and to be able to model their tax profiles given the changing landscape. The diversity of legislation across the region, however, requires new processes and technologies to be customized for each jurisdiction to meet critical local requirements.
How do you anticipate that change impacting your work and the market moving forwards?
These market conditions demand that we deliver timelier and technology-aligned tax advice to help clients more efficiently and effectively meet tax authority requirements through increased visibility and controls. We also bring value to clients by helping them extract more data through automation and by performing data analytics and modelling for deeper insights into their businesses' performance and overall tax profile.
How has this changed the way you offer tax advice?
Our fundamental approach has not changed as a result of these developments. We continue to offer our clients tax advice with consistency and quality, helping them to address business challenges and tax issues with confidence–but now with the use of innovative technologies, we also realize the need in many instances to properly report, model, and present our tax advice on a real-time basis.
What potential other legislative changes are on the horizon that you think will have a big impact on your region/jurisdiction?
While the trend of increased transparency will continue across the region, potential upcoming tax legislative changes could arise in certain significant jurisdictions due to upcoming elections coupled with regional political developments, which could drive major tax reform and/or renegotiation of significant trade agreements. Increased transparency could also mean more controls for cross-border transactions. In addition, the possibility of new digital tax compliance rules could have impacts on processes such as electronic invoicing and digital accounting reports.
What are the potential outcomes that might occur if those changes are implemented?
Companies may need to consider changes to their supply chain, operating models, and legal entity structures in the event of significant tax reform that may arise or the renegotiation of trade agreements. In an environment where there is a push for centralization of real-time reporting and more detailed data requests, we envision that companies may need to model out the potential impacts of significant tax reform in certain jurisdictions quickly. However, the response to local legislation varies.
Do you think that change will have a positive effect on both your practice and the wider regional/jurisdictional market?
The move toward increased automation that we are seeing in the regional marketplace coupled with potential significant changes that may arise will allow our people and our clients in the tax arena to become more aligned with the business, offering insights that are aligned with strategy, finance, accounting, technology, and other functions. In addition, increased automation frees up resources to perform deeper data analysis that can uncover opportunities and help teams more effectively analyze and model a client's tax position.
How are issues surrounding the taxation of the digital economy affecting your jurisdiction?
The impact across the region will continue to evolve as OECD guidance is established and as jurisdictions pivot to address such guidance and develop their own tax laws. While the region generally tends to be territorial in the sense that outbound payments for goods and services are often subjected to higher duties and withholding taxes than other geographies, we do see jurisdictions addressing permanent establishment issues more than in the past. Of course, the changes will likely vary by country. However, the advancements of a digital economy will continue to fuel increased collaboration and consistency across each jurisdiction.
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