Honesty Equals Revenue
Tags: BEPS, Emerging Markets, Global Economy, Hedge Accounting, investment policies, issuing, iTreasurer, October 2017, reducing bank accounts, Risk Management, tax reform, tax strategies, UK Finance Act 2016
Not only is honesty the best policy but it also might be best practice for fattening up tax coffers, too. That’s the idea behind the United Kingdom’s new requirement for UK companies of a certain size to post their tax strategies for all to see. Also, should multinationals feel safe in submitting their tax reports to the revenue authorities in the countries in which they do business? These are just a couple of the topics discussed in this month’s iTreasurer.
First, the honesty policy. As part of UK’s Finance Act 2016, companies with a substantial presence in the country are required to post to the internet on an annual basis a public document that describes their organization’s tax strategy regarding their UK operations. This they feel will push companies onto the straight and narrow and thus increase revenues to Her Majesty’s Revenue and Customs strongbox. If it works, watch out. Other countries might just give it a try. And the potential is high if it turns out to be that easy, suggest Heléna Klumpp, a partner with Ivins, Phillips and Barker, and “perhaps greatest in the United States, where tax legislation is a distinct possibility in the coming months.”
In the Anticipated Exposures section on pages 4-5, iTreasurer takes a look at reducing bank accounts, how some companies are neglecting their investment policies, which means missed opportunities and possibly losses. Also a look at how all issuers are getting extra friendly terms from their investors.
In “OECD: Don’t Abuse Tax Payer Info,” on page 6, companies have been expressing concern that their tax information, which they must report under direction of the OECD’s BEPS (base erosion and profit shifting) Action 13 (part of the 15-point action plan), might be abused or otherwise used not in accordance with the Action’s intent. This worry was strong enough that the OECD issued a guidance on what constitutes abuse and lays out conditions and consequences if any country abuses the tax info. This means, according to the OECD, appropriate use is restricted to:
• High-level transfer pricing risk assessment;
• Assessment of other base erosion and profit shifting related risks;
• Economic and statistical analysis, where appropriate.
So, it sounds like companies will have to keep their fingers crossed.
There are two peer group meetings in this month’s issue, one from the NeuGroup’s Assistant Treasurers’ Leadership Group (ATLG) and the other from the European Treasurers’ Peer Group (EuroTPG). ATLG members tackled tax reform and ongoing Obamacare repeal efforts. In addition they learned about the pluses of FASB’s new hedge accounting and got detailed hedging strategies related to debt issuance.
At EuroTPG members discussed the impact of global politics on their business environment and how despite an improving global economy, increasing emerging markets risks need to be addressed with a robust risk management process.
Finally on page 15, frequent issuers who are members of the NeuGroup’s Treasurers’ Group of Thirty Large Cap Edition, were advised on some strategies for issuing in the current environment. One suggestion was to listen to the market and be responsive, but not overly so and not become too predictable in issue cadence.
For over 20 years, iTreasurer has delivered intelligence for treasurers. Based on exclusive access to senior treasury executives who are members of The NeuGroup Network of treasury peer groups, iTreasurer takes their real-world experience to produce articles, case studies and reports that are specifically meaningful to treasury best practice. www.iTreasurer.com.