Deloitte Asia Pacific Tax Complexity Survey 2021
Business leaders recognize complex tax challenges in Asia Pacific but report that the relatively high consistency and predictability in the region is conducive to doing business.
Conducted in late 2020 and early 2021, Deloitte’s fourth Asia Pacific Tax Complexity Survey, which involved 407 business leaders in 24 key jurisdictions across the region, gauges business leaders’ views on tax complexity, consistency and predictability to understand the current and anticipated tax environment and business landscape where they operate. This edition captures views on two additional factors that are seen to impact tax change: The digitization of business and the COVID-19 pandemic.
How are tax policies affecting your business in Asia Pacific?
Deloitte's 2021 Asia Pacific Tax Complexity Survey aims to provide business leaders with a clearer picture of the tax environment in the region to equip them with relevant information on the complexity, consistency and predictability of the tax environment across the region to make better business decisions.
The responses provide insights into the respondents' perceptions and offer some important takeaways for Asia Pacific tax leaders.
Specifically, the survey addresses three key questions that tax leaders should consider:
- How complex are the tax regimes in Asia Pacific?
- How consistently are the tax laws interpreted and enforced?
- How predictable are new developments in tax laws?
What do the latest results tell us?
The current survey suggests the tax environment in Asia Pacific is seen by business leaders as consistent and predictable, however some complexities remain.
Positive views on consistency and predictability instills confidence
In 80% of the surveyed jurisdictions, respondents felt their local tax regimes are consistent or very consistent. In 75% of those surveyed jurisdictions, respondents reported an intermediate or very high level of predictability in their tax environment to support business planning. This view can be attributed to the growing professionalism of tax authorities in the region and significant advancements in the number of double tax agreements.
Complex tax regimes in most of the region present both challenges and opportunities
Compared to three years ago, 80% of the surveyed jurisdictions believe tax regimes have become more complex than those saying that regime has become less complex. There are only three jurisdictions where the majority view is that compliance and reporting requirements are simple, Hong Kong, Macau, and Mauritius.
The growing complexity of the tax environment in the region is understandable –new laws have been introduced in this region to deal with specific BEPS issues, and to focus on areas of the tax base that had not been attended to by the BEPS project. To some extent, the increased use of digital tools in tax administration should ease the burden of tax compliance and reporting.
The relationship between companies and tax authorities continues to be a key focus area
Over 50% of the respondents for each jurisdiction say they have a neutral or positive relationship with tax authorities. Feedback suggests building a good relationship with tax authorities remains a focus area for many businesses.
Room for improvement: Varying degrees of confidence in appeal systems across the region
Asia Pacific has a wide range of different appeal systems and procedures for challenging tax authorities. Respondents from the relatively more mature economies, including Australia, Hong Kong, Japan, New Zealand, and Singapore, were more confident in their appeal systems given their established precedents for independent or judicial review of cases.
In contrast, respondents from developing jurisdictions in the region were less confident, reported room for improvement in their appeal process. Given the important role that an appeal process plays in establishing a fair and effective tax system, the processes in more mature economies may serve as good examples to other less developed economies.
Respondents have established early views on Pillar 1 and Pillar 2 blueprints
There is still a long way to go before businesses can fully appreciate the impact of the rules on their tax payments, and their competitive position in different markets. When asked whether their businesses would face materially higher tax costs (an increase of tax expense of more than 15%) within one year if the proposed rules of Pillar 1 and Pillar 2 were to be implemented, around a quarter of the respondents expected so for Pillar 1, and 18% of the respondents expected so for Pillar 2.
The region is experiencing a slow but promising recovery from the COVID-19 crisis
As the impacts of COVID-19 play out, in 67% of the surveyed jurisdictions, the majority of respondents reported business recovery has been slow and their businesses have not moved beyond the recover stage. The majority respondents for Mainland China, Cambodia, Mauritius, and Singapore indicated that their businesses have moved beyond the "recover" stage and into thrive or next normal. This aligns with their response to the pandemic.
As the world gradually moves onto the new economic landscape post pandemic, tax policy makers across Asia Pacific are presented with the opportunities to empower a robust and sustainable recovery, taking a holistic approach with tax complexity, consistency and predictability considered. Tax directors and business leaders shall keep up to date with what's happening, from a very specific local incentive all the way to the future blueprints in the digital arena, and embrace technology as their latest and closest partners when stepping into a more resilient world.
About the survey
From December 2020 to January 2021, 407 business leaders across 24 key jurisdictions in the Asia Pacific region were asked to provide their outlook on the tax environment and business landscape in the Asia Pacific region as well as the ongoing coronavirus pandemic and digitization. 42% of the respondents have gross revenues in Asia Pacific greater than US$1B.
For purposes of this survey, "complexity" refers to the perceived level of difficulty in interpreting and understanding the respective jurisdiction's tax laws and regulations.
"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 from tax authorities that allow taxpayers to foresee the direction and potential changes in tax law so to allow business planning promptly.
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