Accounting and tax professionals working for multinational businesses will continue to face significant challenges as the trend for greater harmonisation in global compliance and regulation fails to gather pace, a report by TMF Group, a leading provider of international business administration support services, reveals.
The ‘TMF Group Accounting and Tax Report’, part of the 2019 Global Business Complexity Index which analysed 76 different jurisdictions worldwide in terms of ease of doing business, revealed that while “small steps” are being taken towards global conformity, local tax and accounting practices continue to heavily influence business decisions and operating models.
The findings show, for example, that while 77% of jurisdictions have implemented laws which align with the OECD’s ‘Base Erosion and Profit Shifting’ initiative, in just over half it is still the norm to use local GAAP (Generally Accepted Accounting Practices). Of note, only 28% of jurisdictions worldwide adhere to the IFRS rules (International Financial Reporting Standards).
These differences continue to present huge complexities and potential pitfalls for companies with global operations, with the prospect of “significant penalties” in 83% of jurisdictions for those that do not comply with tax regulations, according to the findings.
One of the reasons cited for this discord lies in the different commitments and priorities by the relevant authorities in striking the right balance between aligning their tax rates with international standards so companies perceive their jurisdiction as well-developed, attractive economies, and wanting to appeal to investors by offering competitive tax rates and incentives.
Among the disparities highlighted in the report are:
“Worldwide, we see small steps towards the standardisation of tax and accounting principles,” said Emine Constantin, TMF Group’s global head of accounting and tax. “However, based on experience of supranational legislation, whatever the extent of convergence, the reality for businesses is that they will still need to navigate different regulations in different countries.
“Understanding local business environments should be a top priority for any multinational. The depth of cross-border variances impacts not only the cost of business operations but determines which systems and processes to implement and the types of professional skillsets needed.”
About TMF Group
TMF Group is the leading provider of administrative support services for international business expansion. With some 7,800 experts – in-house, on the ground in over 80 locations – we are the only company worldwide to provide the combination of fiduciary, company secretarial, accounting and tax and HR and payroll services essential to the success of businesses investing, operating and expanding across multiple jurisdictions. We know how to unlock access to some of the world’s most attractive markets – no matter how complex – swiftly, safely and efficiently. That’s why over 60% of the Fortune Global 500 and FTSE 100 and almost half of the top 300 private equity firms use us. We make a complex world simple. www.tmf-group.com
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