Key 2016 business tax issues you need to know about
Keep your eye on these
Ongoing tax reform developments in a presidential election year, greater compliance demands and a continued focus on tax transparency will make the tax environment in 2016 a very challenging one for company stakeholders.
In 2016, it is critical for decision makers in Colorado to stay informed on a number of tax issues in the U.S. and abroad. These international, federal and state tax issues could affect company operations and, potentially, corporate reputations.
To provide the best value for their companies, leaders will need to stay informed and consider a range of tax scenarios when making business decisions.
Looking ahead, here are some action items for executives in 2016:
- Keep A Close Watch On Business Tax Reform Developments – While the prospect of tax reform in 2016 are uncertain, it remains a priority for members of Congress, and business leaders should keep a close watch on the continuing debate. Interest in reducing tax code complexity and stimulating competitiveness, coupled with developments that bring new leaders and influencers into the process, creates the possibility for action on some version of reform in the coming year. One area to watch with some common ground is on the international front. With the Presidential election coming into full swing, executives should stay engaged and monitor proposals, and consider engaging with members of Congress on policy direction.
- Monitor Ongoing Calls from Regulators for Heightened Visibility into Corporate Tax Arrangements – The Organisation for Economic Co-operation and Development’s (OECD) Base Erosion and Profit Shifting (BEPS) project, emphasizing enhanced tax compliance in the 21st century, is in the implementation stage. Companies need to monitor the steps taken by individual countries to adopt BEPs recommendations and then determine their responses, such as preparing to meet the enhanced transfer pricing documentation and reporting requirements, which may require significant internal investment or even changing how you operate.
Of particular importance will be Country-by-Country Reporting, which will require the parent company of multinationals to provide a single country-by-country report to the government in which they are resident and include detailed financial information about their operations in every jurisdiction in which they operate. Companies will also need to consider the increased visibility of their tax positions, the potential for increased tax exams, potential for exposing proprietary information, and any reputational risk from this added disclosure.
- Be Prepared to Comply with FATCA and OECD’s Common Reporting Standard – During 2015, financial institutions in made their first reports under the U.S. provisions commonly known as the Foreign Account Tax Compliance Act (FATCA), and obligations under FATCA will continue to phase-in during 2016. In addition, multinational enterprises must ensure that they can comply with their obligations under the OECD’s Common Reporting Standard (CRS), which took effect in over 50 “early adopter” jurisdictions on Jan. 1, 2016. While the CRS is based on FATCA, multinationals need to be aware of significant differences. In particular, many of the exemptions that apply under FATCA do not apply under the CRS, so many more institutions and relationships will be affected under the CRS.
Even though the U.S. has not adopted the CRS, U.S. businesses must meet the new standards if they have business dealings in any implementing jurisdiction.
- Keep an Eye on State Tax Developments – With the Presidential election and a number of gubernatorial elections taking place, the coming year should be a relatively quiet one for state tax law changes. But executives are should be attentive to some pending developments. In certain states, particularly oil and gas producing states, fiscal stress may force lawmakers to adopt tax increases or “loophole closing” measures. Additionally, Like Colorado’s “Amazon Tax”, a number of states are considering legislative proposals implementing remote-seller sales tax collection responsibilities, especially in light of Colorado’s recent win in the 10th Circuit. Finally, in certain states, such as New York, Pennsylvania, and Tennessee, that have made meaningful changes to their corporation income tax over the last couple years, the state taxing authorities are just starting to issue guidance on the new laws.
- Be Mindful of Payroll Tax Reporting and Withholding Rules to Stay Compliant – Today’s mobile workforce makes it necessary for companies to track employees working across borders, internationally and domestically. Neglecting to properly report and withhold taxes associated with mobile employees can put a company at risk of losing foreign tax credits and corporate deductions; over-paying liabilities; and incurring penalties. Individuals also risk financial penalties for failing to pay taxes or for not filing the required documents with the appropriate tax authorities.
Tax authorities are also implementing technology to make it easier to detect non-compliance.Employers will need to implement new processes and technology to meet global and domestic tax reporting obligations with respect to mobile employees, preferably before issues arise.
- Think Creatively About Tax’s Growing Technology Needs – Companies are recognizing that mining data and insight from their tax functions can provide value beyond the traditional tax function. In 2016, business leaders should strive to unlock the full power of their tax operations – in part by investing strategically in technology solutions that help put their tax departments on par with their finance operations, and by integrating tax into their enterprise information management systems.