The tax affairs of some of the world's most well-known businesses have been the subject of intense media attention over the last few years, and this has served as a catalyst for a global international tax reform.
To address global tax avoidance challenges the G20 and Organisation for Economic Cooperation and Development (OECD) undertook an extensive review, the Base Erosion and Profit Shifting (BEPS) project, to examine how a modern international tax system should work and in October 2015, finally issued their BEPS Action Plan.
RSM commissioned a survey that has revealed that the BEPS Action Plan will actually impact both middle market firms as well as the large multinationals.
The results show that middle market (defined as revenues US$50million to US$1billion) and large-company respondents (revenues over $1bn) share similar views when it comes to the BEPS project ideology and the expected impacts on their business structure and tax bills.
We believe the BEPS project will impact the world's largest groups, but the survey shows just how far the BEPS changes penetrate. Nearly three quarters of all businesses surveyed expect the rules to increase their effective tax rates with 27 per cent expecting their tax bill to grow by more than 10 per cent.
Almost half of middle market businesses expect their tax burden to grow by up to 10 per cent, with 31 per cent expecting their effective tax rate to increase by more than 10 per cent.
Given the OECD have estimated historic tax lost pre-BEPS implementation as being up to $240bn globally, it is no surprise that businesses expect their tax liabilities to rise.
Compliance costs are also on the increase, with 65 per cent of middle market companies expecting these to grow by more than 10 per cent.
It is here where middle market businesses may be disadvantaged compared with larger organisations with significant resources to work through the rules changes globally.
Many mid-sized businesses will need to be more proactive in terms of thinking through international tax issues at an early stage and whilst due to their size, some business can ignore many of the disclosure requirements, they will still have the same substance issues, as well as facing other consequential tax changes such as changes to interest deductibility.