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Deloitte launches ICE in Asia Pacific to provide integrated tax solutions

Inaugural survey shows that China and India are priority business locations, yet with the most complex tax environments


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Published: 7 June 2010

Deloitte Asia Pacific International Core of Excellence (AP ICE) is officially launched today to provide international tax solutions to clients, leveraging the experience of 21 senior tax professionals from 15 jurisdictions, including Australia, Canada, China, France, Germany, India, Ireland, Japan, Luxembourg, the Netherlands, Singapore, South Korea, Taiwan, United Kingdom, and the United States.

"For us, the launch of ICE is an important initiative which is brought about by the dynamics of globalization as well as the increase in cross-border business activities in the region. The nature of highly integrated cross-border business activity gives rise to complicated jurisdictional issues and potential risks. We hope to provide a new level of integrated solutions to Asia Pacific based companies investing abroad as well as multinational companies investing in the region," said Mr. Dan Lange, Deloitte Global Managing Partner, Tax.

As one of its debut initiatives, AP ICE also releases today the Asia Pacific Tax Complexity Forecast, which surveyed over 1,000 financial and tax professionals in April within Asia Pacific. The report seeks to provide a benchmarking tool for business to compare their perceptions of and responses to the current and anticipated tax environments across the region and provide some general guidelines to facilitate business decisions and tax management practice.

According to the survey, business opportunity seems to be a more important consideration than tax complexity when it comes to choosing priority business locations. Around 55% of respondents indicated that their companies had in the past exited or postponed entry to markets because of their concerns about tax complexity and consistency. Most survey participants also expected that China (329 respondents) and India (223 respondents) will have the most complex tax environments in 2013. Yet, the highest number of respondents rated China (311 respondents) and India (146 respondents) as their priority business locations in region.

"The responses reflect generally an alignment between the priority tax locations and the underlying macroeconomic trends. Japan, Singapore and Hong Kong are among the other top five priority locations. In our experience, these top five priority jurisdictions reflect both a business focus on market potential as well as operation organization to optimize tax planning,” said Mr. Alan Tsoi, Deloitte AP ICE Co-Leader. "There are also distinct roles played by different jurisdictions in the region, for instance, Australia and Indonesia represent priority tax management areas for energy and resource companies, while Hong Kong and Singapore continue to be popular locations for the financial service industry and for certain regional business functions."

In addition to China and India, which are expected to have the most complex tax environments in 2013, respondents gave the highest vote to Japan (119 respondents), South Korea (78 respondents) and Australia (76 respondents) for tax complexity in the next three years. Japan and South Korea are more mature markets and their perceived tax complexity is perhaps the result of previous rapid modernisation and resultant tax effects which have not yet been simplified. Australia is the jurisdiction with the fifth highest votes for complexity and the launch of the Henry Review may add to further perceptions of complexity. Hong Kong and Singapore are seen to have the least complex tax environments in 2013.

The survey report also studied tax consistency and predictability in different jurisdictions as well as its challenges to business. China and India are perceived as less consistent in enforcing tax law, while Singapore, Hong Kong and Australia are considered to have more consistent tax policies and enforcement. According to the survey, tax audits are most common in tax jurisdictions including China, Japan, India and South Korea. Around 144 companies experienced tax audits in the past three years in China, followed by Japan (94 companies), India (87 companies), and South Korea (69 companies).

When it comes to predictability, China, India and Indonesia are perceived to have the least predictable tax environments, while the tax systems in Singapore and Hong Kong are perceived to be the most predictable. Elsewhere, the tax environments of Japan, South Korea, Taiwan and Australia are also frequently selected as being fairly predictable.

"Given the divergence in tax complexity, consistency and predictability among jurisdictions in the region, it is important for companies to consider the appropriate combination for their business of in-house and outsourced resources and the choice of location of certain business functions. In response to the aggressiveness in tax audits in some fastest growing markets, companies should pay close attention and devote more resources to mitigate future tax exposure. To manage unpredictability, tax professionals should not underestimate the value of their experience in helping to watch for signals and the likely path of change and enforcement,” said Ms. Lili Zheng, AP ICE Co-Leader.

About Deloitte Asia Pacific International Core of Excellence

The Deloitte Asia Pacific International Core of Excellence (“AP ICE”) was established in June 2010 to provide international tax consulting services to Asia Pacific based companies investing abroad as well as multinational companies investing in Asia Pacific. AP ICE is based in Hong Kong and has a team of 21 senior tax professionals from 15 tax jurisdictions, including Australia, Canada, China, France, Germany, India, Ireland, Japan, Luxembourg, the Netherlands, Singapore, South Korea, Taiwan, United Kingdom and the United States.

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