Deloitte: Multinationals expect higher tax burden because of the OECD reform and the European directives on taxation

Almost half of companies worldwide (47 percent) expect a significant increase in their group’s global effective tax rate, because of the implementation of the two-pillar global tax reform coordinated by the Organization for Economic Co-operation and Development (OECD), while a similar proportion (50 percent) anticipate higher taxes in their ultimate parent company’s jurisdiction, due to increased government debt accumulated during the COVID-19 pandemic, according to a Deloitte study. In addition, 90 percent of companies estimate that more tax disputes may arise out of increased government deficits recorded in recent years.

Regarding the regulations proposed by the OECD, 59 percent of companies estimate that a significant number of countries will implement them by 2024. In these circumstances, 55 percent are confident that they have readily available tax and accounting data necessary to comply with the provisions of Pillar II (global minimum corporate tax). But in the case of Pillar I, consisting of fairer distribution of taxing rights and profits among the countries where they are obtained, only 25 percent expect the United States Senate to approve the required legislation by 2023.

On the other hand, 80 percent of companies do not think that the European Union tax directives (DAC6, ATAD3, Country by Country Reporting etc.) will succeed to simplify tax compliance obligations across the EU, mainly due to the increasing number of rules, requirements, and reporting deadlines (60 percent).

“The implementation of the OECD tax rules is still uncertain, due to the United States’ indecision on Pillar I, which aims mainly to tax the big tech giants. A possible deadlock related to this pillar could compromise the entire agreement, signed in 2021, and could reopen the discussion on the unilateral application of the digital tax by the signatory states. On the other hand, at European level, tax legislation is becoming more complex, and reporting requirements involve bigger data sets, so large companies need to invest significantly in technology-based tax compliance solutions. All these changes are aimed at increasing tax transparency inside each jurisdiction, but also in cross-border transactions. The multinationals operating in Romania are subject to European legislation’s provisions, but they must also consider the OECD recommendations, which could be transposed in the national legislation, given that our country is in the process of joining this organization and is also a signatory state of the international tax reform agreement,” said Dan Badin, Tax Partner, Deloitte Romania.

According to the study, almost 40 percent of the companies claim that, during the last year, the tax authorities in their ultimate parent’s jurisdiction have become more rigorous in tax examinations, and half (48 percent) said that their group had experienced instances of double taxation, because of uncoordinated unilateral tax law changes in contrast to coordinated international approaches.