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2014 Deloitte Asia Pacific Tax Complexity Survey Report

SINGAPORE, April 7, 2014 — For a nation that strives to be amongst the world’s most competitive and business friendly economies, it comes as no surprise that Singapore scored well in a survey on tax complexity, with a high number of respondents indicating that Singapore’ tax environment has a good or high level of consistency and predictability.

Deloitte released its 2014 Asia Pacific Tax Complexity Survey Report today, which highlights key tax trends facing businesses operating in the region. The report surveyed over 800 financial and tax professionals in 20 jurisdictions across Asia Pacific.

In the survey, a follow-up to the inaugural 2010 report, one of the key findings this year was that businesses are placing greater focus on consistency in tax policies than complexity and predictability when deciding to enter or exit a market in Asia Pacific. This finding is a reversal of the 2010 study where businesses placed greater emphasis on complexity and predictability of tax policies then.

The definition of these three terms as follows:

  • Consistency refers to the perceived uniformity and transparency of enforcement of prevailing tax laws by the jurisdiction
  • Predictability refers to the availability of information and resources that allow taxpayers to foresee the direction and potential changes in tax law
  • Complexity means the perceived level of difficulty in interpreting and understanding the respective jurisdiction's tax law and regulations

 

Key survey findings:

  • Consistency
    • While Tax is a key factor for investors in making investment decisions in Asia Pacific, respondents believe that consistency in tax policy is more important than predictability or complexity.  According to 85 percent of respondents, tax policy is a high priority when considering investing in the Asia Pacific region.  Therefore, achieving this consistency should be carefully considered by governing bodies.
    • Specifically, 93% of the total respondents rated Singapore as having a consistent or very consistent tax regime.
  • Predictability
    • 89% of respondents believe that Singapore’s tax regime has a good or very high level of predictability.
    • While respondents were appreciative of the predictability of the Singapore, Hong Kong and New Zealand tax regimes (more than 85% of respondents rated them as either possessing a good or very high level of predictability), they were less sanguine about the prospects for Chinese Mainland, India and Indonesia.
    • At the same time, more than 80% of respondents were confident in the effectiveness of tax administrative procedures in place in Singapore, Australia, Hong Kong, Japan and New Zealand. Specifically, Singapore scored well again at a high confidence rate of 86%.
  • Complexity:
    • Respondents believe that India, Mainland China and Indonesia are expected to be the three most complex tax regimes by 2017.
    • Singapore has shown that it is amongst the least complex. 90% of respondents surveyed said Singapore’s tax regime has either not changed much from 3 years ago or has become less complicated.
  • Tax management:
    • Respondents are very focused on taxation matters, their effect on business and their effect on their broader communities.  Over 50% of respondents indicated that their board of directors and C-suite are now engaged in taxation matters and a high percentage indicating that they consider reputational risk when considering tax matters.
    • Over 50% of respondents with operations in Chinese Mainland envision that they will spend more time and resources on tax management in Chinese Mainland over the next three years than currently. In contrast, just 17 percent and 15 percent of respondents with operations in Singapore and Hong Kong, respectively, think that they will spend more time and resources on tax management in these jurisdictions over the period in question. This is interesting because even though these two jurisdictions continue to grow as regional tax hubs, their perceived level of complexity, consistency and predictability is influencing taxpayers' decisions to allocate less time.

 

“The principles of tax consistency, complexity and predictability increasingly influence the decision of corporates as to whether they will invest in a market. What we have found is that tax regimes in Asia Pacific have got increasingly more complex, bringing with it risk and uncertainty to businesses operating in the region. With the OECD's Base Erosion and Profit Shifting project ("BEPS") set to bring sweeping changes to the tax landscape, I expect even greater complexity—but also opportunity—in the future. ” said Alan Tsoi, Deloitte’s Asia Pacific Regional Managing Director for Tax and Legal.

Low Hwee Chua, Tax Services Leader for Deloitte Singapore & Southeast Asia, also shared that “The survey reinforces the point that Singapore is one of the easiest countries to do business in, with our tax policy being viewed as one of the most consistent, most predictable and least complex in Asia Pacific. This is definitely a well-deserved reputation and the Singapore Government can be proud of this achievement as it is a tough balancing act to ensure that tax policies address both business and country needs. Going forward, however, it would be increasingly challenging to do so in view of the various BEPS initiatives that are expected to be introduced to address the issues of tax base erosion and to improve tax transparency. However, it is encouraging to see that survey respondents appear positive about Singapore and have indicated that Singapore’s tax environment is unlikely to experience material change in the near term.

On a wider level, respondents generally felt that many tax bureaus in the region are not sufficiently equipped to deal with today’s business complexities.  Tax inspector training and increased speed and resolution of tax audits should be a priority of such governing bodies.”

To download a copy of the full report, please click here.

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