tax risk on the rise

© 2013 EYGM Limited. All Rights Reserved. ED none. Tax risk on the rise £32,000,000,000 The amount of tax that went uncollected in the UK in 2010–11, according to HM Revenue & Customs (HMRC), slightly up from £31b the year before Source: HSBC Expat Explorer 2011, Atlas Corporate Relocation Survey 2011, Ernst & Young Global Mobility Effectiveness Survey 2011, EIU ; Up or out: Next moves for the modern expatriate 2010; graphic: Käthi Dübi The percentage of China-based companies that have seen a rise in the number or rigorousness of tax audits in the last three years 92% The percentage of India-based companies that have experienced stricter disclosure and transparency requirements in the last two years 85% New sources of tax risk Growing disclosure and transparency requirements Tax administrations around the world become more rigorous ! Increased pace of legislative change For the latest tax news and insights, please visit: ey.com/tmagazine Canada C$14,780m 1.16% Indonesia IDR16,134,468m 1.0% Korea 2,900,129m 0.81% US US$64,623m 0.52% Mexico MEX$25,677m 0.48% New Zealand NZ$163m 0.33% Czech Republic K 2,538m 0.20% Country * 2009 Tax claimed in cases not finalized at year-end * Percentage of public debt Tax audits and public debt Even if all the tax associated with open cases were to be collected by the tax authorities, this only represents a small portion of public debt 800+ The number of bilateral tax information exchange agreements that have been signed since 2009 as part of the Organisation for Economic Co–operation and Development (OECD)’s Global Forum on Transparency and Exchange of Information for Tax Purposes 207 The number of General Anti–Abuse Rule (GAAR) cases concluded in 2011, as reported by the Chinese tax authority, which resulted in around US$24b in taxes being collected US$385b The amount in US$ expected to be recovered by Foreign Account Tax Compliance Act (FATCA) over 10 years; the cost of FATCA compliance for some large firms is estimated at between US$70m and US$100m £40m The amount one UK corporation was forced to pay in back taxes and penalties for failing to accurately report home-paid income Expansion in emerging markets ? A new breed of tax activism has emerged 200% The maximum penalty, as a percentage of tax underpaid, that Italy has the power to levy on companies falling foul of anti-avoidance legislation US$350b The latest estimate by the Internal Revenue Service of the amount of tax that is underpaid in the United States The percentage of business leaders who think that operating in emerging markets significantly increases their levels of tax and tax controversy risk 73% Companies experiencing an increase in the number or rigorousness of tax audits in the last two years All companies 57 57 69 60 52 48 75 Tax directors of US$5b+ revenues US$3b+ revenues Americas BRICS EMEIA Asia

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Tax risk and controversy have never been higher on the corporate agenda. Governments around the world are battling to control their public finances. They are working hard to raise tax revenues, close loopholes and share information that will lead to better compliance. To find out more, visit: http://tmagazine.ey.com/issue/issue-10/

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Tax riskon the rise

£32,000,000,000The amount of tax that went uncollected in the UK in 2010–11, according toHM Revenue & Customs (HMRC), slightly up from £31b the year before

Source: HSBC Expat Explorer 2011, Atlas Corporate Relocation Survey 2011, Ernst & Young Global Mobility EffectivenessSurvey 2011, EIU ; Up or out: Next moves for the modern expatriate 2010; graphic: Käthi Dübi

The percentage of China-basedcompanies that have seena rise in the numberor rigorousness of tax auditsin the last three years

92%

The percentage of India-basedcompanies that haveexperienced stricter disclosureand transparency requirementsin the last two years

85%

New sources of tax risk

Growing disclosureand transparency requirements

Tax administrations aroundthe world become morerigorous

! Increased pace of legislativechange

For the latest tax news and insights, please visit: ey.com/tmagazine

Canada C$14,780m 1.16%Indonesia IDR16,134,468m 1.0%Korea 2,900,129m 0.81%US US$64,623m 0.52%Mexico MEX$25,677m 0.48%New Zealand NZ$163m 0.33%Czech Republic K�2,538m 0.20%

Country

*2009

Tax claimed in casesnot finalized at year-end*

Percentage ofpublic debt

Tax audits and public debtEven if all the tax associated with open cases were to be collected bythe tax authorities, this only represents a small portion of public debt

800+The number of bilateral tax informationexchange agreements that have beensigned since 2009 as part of the Organisation for Economic Co–operationand Development (OECD)’s Global Forum on Transparency and Exchange of Information for Tax Purposes

207The number of General Anti–Abuse Rule (GAAR) cases concluded in 2011, as reported by the Chinese taxauthority, which resulted in aroundUS$24b in taxes being collected

US$385bThe amount in US$ expected to berecovered by Foreign Account TaxCompliance Act (FATCA) over 10 years; the cost of FATCA compliance for some large firms is estimated at between US$70m and US$100m

£40mThe amount one UK corporationwas forced to pay in back taxesand penalties for failing to accuratelyreport home-paid income

Expansion in emerging markets ?A new breed of tax activismhas emerged

200%The maximum penalty, as a percentageof tax underpaid, that Italy hasthe power to levy on companiesfalling foul of anti-avoidance legislation

US$350bThe latest estimate by theInternal Revenue Service ofthe amount of tax that isunderpaid in the United States

The percentage of business leaders who think that operating in emerging markets significantly increases their levels of tax and tax controversy risk

73%

Companies experiencingan increase in the numberor rigorousness of taxaudits in the last two years

All companies57

75Tax directors of US$5b+ revenues

US$3b+ revenues

Americas

BRICS