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FREE: Asia taxpayers offer advice on how to avoid scrutiny

Multinational companies in Asia need to “think on their feet” and “simplify existing structures” if they are to avoid the attention of increasingly revenue-hungry tax authorities, says a group of the region’s leading tax directors.

Speaking exclusively to International Tax Review, the taxpayers expressed concerns that unless companies acknowledge they are targets of the authorities, then they should prepare for the inevitable challenge.

“I am expecting and facing more audits,” said Bill Thomson, Asia-Pacific tax director at TimeWarner. “This is basic arithmetic. National budgets are getting bigger and so the money has to come from somewhere. And unfortunately, they are going after the big ticket companies.”

“Simplifying structures is the order of the day,” said Watson Wang, head of China tax at BP. “If anything seems complicated and too difficult for the officials to understand, then they will target it.”

“Tax authorities are driven by targets and so it is inevitable that big companies are under great scrutiny,” said R Mani, head of India tax at Tata.

Mani explained that the Indian tax department have been known to approach large taxpayers as they near the end of the financial year to ask for extra tax. In return, the officials promise to return the money with interest in the shape of a refund the following year.

Despite the concerns that they are in the cross-hairs of the taxman, the tax directors did offer some advice on how to reduce the exposure to risk.

“It is easy to say that taxpayers need to think on their feet, but this should be the attitude they adopt,” said the global head of tax at a large telecommunications company. ”My concern is that something I do today may be investigated in three or four years time by the authorities. I need to be constantly looking into the future. The only way I can realistically do this is by constantly amending and adjusting structures and operations to ensure we don't fall foul of changing regulations.”

Irrespective of this seemingly simple advice, taxpayers are urged to not try and adopt a consistent approach to handle tax audits and investigations across the region.

“What taxpayers need to know is that tax offices across the region take difference approaches to the same issues,” said Wang.

“In recent times we have become involved in more audits. We don’t have people on the ground in all the countries so we carry out a risk assessment in each case and decide how to handle it,” said Thomson.

To read more on what Asia’s leading tax directors have to say, watch out for the September issue of International Tax Review. If you are a tax director operating in Asia, contact Jack Grocott (jgrocott@euromoneyplc.com) to take part in the story.

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