Asia-Pacific: Regional interview
What is the most significant change to your region/jurisdiction's tax controversy/disputes legislation in the past 12 months?
In recent times, the most significant change to the tax controversy landscape has been the increase in information provision requirements of taxpayers and the increase in interaction of revenue authorities across the region through information sharing and mutual assistance regimes. In addition, developments in data technology have given rise to greater coordination between different authorities within countries and across the Asia-Pacific region.
What has been the most significant impact of that change?
With the increase in information, revenue authority scrutiny has also increased with many reviews and audits spanning longer periods and covering more areas than previously experienced. While the approach adopted in each country remains relatively diverse, there is a commonality in the types of issues being experienced, particularly for multinationals that operate across the Asia-Pacific region.
How do you anticipate that change impacting your work and the market moving forwards?
Taxpayers and advisors will need to come up with a substantially coordinated approach to dealing with potential tax controversy areas across the region. It is important that traditional tasks such as tax compliance are performed with care to ensure inaccuracies and errors do not find their way into filings that are likely to give rise to inconsistencies, as this will raise concern with revenue authorities. Regional managers will need to take a more region-based approach to risk assessment to allow greater access and visibility to local entity information, and employ centralised management of information.
How has this changed the way you offer tax advice?
It is imperative that advisors also provide enhanced levels of coordination across the region. Problem solving is increasingly moving away from unilateral jurisdiction outcomes and regard must be given to implications for taxpayers across jurisdictions. This poses certain challenges, given the different pace at which the dispute cycle operates in diverse markets and the differences in process adopted by each authority.
What potential other legislative changes are on the horizon that you think will have a big impact on your region/jurisdiction?
Developments in the law across jurisdictions dealing with information, data privacy and 'know-your-client' regimes are changing fast, and carry natural implications for increased opportunity for access to taxpayer information and potential review activity in multiple markets.
OECD and multi-country governmental initiatives are pushing multinationals towards more aligned approaches to their tax operation models, with some countries beginning to incorporate this into local law. While approaches in different jurisdictions have generally been jurisdiction-specific, this will require transition and a need to revise the way local authorities are dealt with.
What are the potential outcomes that might occur if those changes are implemented?
The importance of the tax function is likely to elevate and require greater interaction with other parts of the business in dealing with this changing landscape. As businesses implement systems to manage compliance with these new regimes it will be important that the tax function is able to draw easily upon this information to help in its dealings with revenue authorities across jurisdictions.
Again, the theme of greater coordination and alignment arises and emphasises the importance for organisations and their advisors in dealing with tax controversy in a more aligned manner.
Do you think that change will have a positive effect on both your practice and the wider regional/jurisdictional market?
In the long term, changes of this type are likely to be beneficial for practices such as Deloitte's, and the wider market in general, because of the ability to apply more consistent approaches, methodologies and technologies to deliver solutions, as the challenges will be more universally defined.
In the shorter term, there is likely to be a period of greater uncertainty and disruption as part of the move towards more unified approaches. Throughout the Asia-Pacific region in particular, the significant economic market and cultural differences may pose challenges in how efficiently this shift can be made.
How are issues surrounding the taxation of the digital economy affecting your jurisdiction?
All countries appear to be challenged by the move towards a digital economy. There has been a considerable and long running debate around philosophies for appropriate approaches to taxing in a digital economy. The abovementioned shift towards greater information regimes is likely to provide a more extensive base for the scrutiny of tax outcomes in different jurisdictions, arising from the digital economy. Deloitte has already observed this commencing in certain jurisdictions with review programmes built around this area.
What is the tax authorities' approach to tax auditing?
Tax authorities' approach to tax auditing is, in general, changing and increasing with time. It is covering a greater proportion of taxpayers, while seeking greater access to information and underlying transactional support, and covering more issues than previously experienced.
How has tax advice adapted to the changing tax audit approach, and how do you expect it to change further?
Taxpayers and advisors have changed their approach to tax advice to recognise the modern experience, where the positions taken will be accessed by revenue authorities and scrutinised in multiple jurisdictions. The need to spend more time on preparing support for future scrutiny creates challenges, because of the importance placed on speed and efficiency in delivering advice during the transaction phase.
Taxpayers and advisors will continue to invest in developing processes and methodologies to help address this tension in particular, as the lead-time between transaction and revenue authority review shortens. As jurisdictions become more aligned in their approaches, this process is likely to become more manageable.
For disputes that require litigation (pre-litigation, and court proceedings), how are evolving in your jurisdiction/region? Are pre-court settlements becoming easier, and why?
In general, the pace of change in formal legal systems is not moving as quickly as the change in audit approaches, which creates the potential for a greater number of matters to be caught in the system.
However, there is a general willingness to explore alternative resolutions across most jurisdictions in the region to avoid the high cost of, and time consumed by, formal litigation. This is understandable and it is becoming more important where issues have a multijurisdictional impact as local-market-only decisions are not the most efficient path for resolution in matters of this type.
Deloitte Australia, National Deloitte Legal and Tax Controversy Leader
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