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Analysis

Business traveler compliance: Identifying potential challenges

2018 global business traveler compliance trends survey results

What are the issues companies face in their efforts to address tax compliance for cross-border, global business travelers? See the results of Deloitte’s 2018 global business traveler compliance trends survey to understand companies’ attitudes and actions toward global business traveler compliance and the risks it presents.

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Global business travel continues to grow

The amount of domestic and cross-border global business travel continues to rise in today’s fast-paced, fluid business environment. “Business travelers” can comprise a diverse employee population—from technicians and sales representatives to project managers and C-level executives—traveling for a variety of reasons—to visit suppliers or customers, work on projects, or attend meetings for periods of varying length.

The overwhelming majority (95 percent) of survey respondents reported having business travel activity. Moreover, of the 95 percent noting business travel activity, 74 percent of respondents reported the percentage of time an average employee might spend working in tax jurisdictions outside their home location to be 20 percent, and 18 percent of respondents reporting an average as high as 40 percent of an employee’s time.

Business traveler compliance: Are companies identifying potential challenges?

Unlike traditional mobile employee populations (e.g., expatriates or assignees) under formal policies who are consistently tracked, global business travelers may not be as frequently analyzed. In a competitive global landscape driving a growing reliance on business travelers to meet business needs and organizational goals, this oversight can represent significant and complex challenges for companies, including tax compliance.

Of those survey respondents who noted having business traveler activity, a combined 56 percent said their companies did not track their business traveler population (or were not sure if tracking existed) for purposes of allocating any portion of compensation and operating payroll reporting and withholding. Of those 56 percent of respondents, 40 percent cited the lack of a mechanism within internal systems to identify and track employee travel as the largest impediment to their company’s ability to track business travelers.

Moreover, of the 45 percent of respondents that stated their companies do track employee business travel for purposes of allocating compensation of various types, and to varying degrees, to operate payroll reporting and withholding, the majority (59 percent) cited internal resource issues as the most common issue their organizations face in doing so.

Business traveler compliance comes with data challenges

Data may impact a viable approach to business traveler management and tax compliance. However, only 7 percent of respondents reported that their companies have access to and proactively use the necessary data. In contrast, a significant number of respondents (34 percent) noted that they do not currently have the data they need to produce insights and drive good decisions.

Addressing the tax compliance risk

We find that companies face not only practical and cost-related challenges to global business travel, but also challenges to:

  • Effectively manage employment and tax-related costs;
  • Focus on social security and tax compliance;
  • Pro-actively assess potential nexus and permanent establishment risk;
  • Adhere to internal governance policies and protect corporate reputation;
  • Better understand and mitigate the risks inherent to today’s tax compliance landscape; and
  • Increase focus and information sharing by jurisdictions in relation to employee cross-border, global business travel.

Despite the challenges and potential exposure, only 9 percent of survey respondents said their companies are actively addressing business traveler compliance management. Moreover, 41 percent of respondents noted their companies feel business travel is an issue that needs to be addressed but is not currently a primary focus—while 31 percent reported it is not an identified issue for their companies at this point.

We have found that companies that proactively approach the challenges and risks inherent to business travel may be able to mitigate the impact of those risks.  However, 18 percent of respondents reported that, to date, their companies had not begun to address business traveler compliance, while 35 percent described their companies as not having a proactive focus and being reactive when specific events arise.  Approximately 18 percent of respondents said their companies address business travel effectively for specific employee categories, while another 18 percent said they address it effectively for specific countries or states.

What may stand in the way of business traveler compliance?

Respondents identified a variety of business and organizational issues as limiting factors in their efforts to address global business traveler challenges—chief among them is “establishing the organizational buy-in of the business issue” (24 percent), followed closely by “effectively monitoring and managing the information and embedding in core processes (20 percent).

From understanding risks to action

Companies should better understand the specific risks inherent in today’s business traveler compliance landscape. Making it more of an organizational priority—and taking proactive steps to manage the process—can help them get ahead and stay ahead of the potential business risks and consequences.

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About the survey

• Conducted during May and June 2018
• 278 respondents employed by companies globally across various industries
• Functions/roles of respondents span accounting, finance, HR, legal, and tax
• Job titles of respondents include stock, payroll, benefits, compensation, or mobility

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