With the BEPS rollout continuing apace, transparency continues to be the order of the day across the world, and Latin America is no different.
It is right that authorities and the wider international community should expect transparency from corporates. With base erosion and profit shifting taking on an ever greater importance in the light of a string of high profile tax avoidance scandals, and a number of internationally prominent leaks – not least the Panama Papers – sapping tax morale worldwide, it is more vital than ever that authorities can say with confidence that all multinationals are playing by the rules. Even if the majority are paying the right amount of tax in the right jurisdiction most of the time, a few bad apples coming to public attention leads to a climate of distrust which is not helpful for anyone, not least taxpayers looking to protect their reputation.
Of course, greater transparency often means a higher compliance burden for companies. If it is, in this new era, to be expected that corporates should be transparent with governments, it is the responsibility of governments to set clear and simple rules and ease the cost and time of paying taxes.
Latin America notably lags behind in this regard, with many nations in the region considered by the World Bank to be among the worst performing when it comes to paying taxes. For example, as discussed in this supplement, Brazilian companies spend an average of 2,038 hours on tax compliance, making Brazil 181st out of 190 countries. The continent's largest economy is now looking at various tax reforms, including implementing a VAT system, but with the government weakened by corruption scandals, it has little power to see through reforms at this time.
As you'll see in this, our 14th Latin America guide, transparency, simplification and tax reform are three key themes you will read about from some of the continent's leading advisers. We hope you find it informative as always.
International Tax Review