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prospects looking rosy

Kitty Miv, Editor
08 February, 2019

One of the great ironies of the OECD's BEPS project is that it's great for business – if you happen to be in the business of tax advisory work, that is. This wasn't supposed to happen. If anything, it was supposed to be the other way around. Multinational tax departments would no longer need to scour the globe for what are loosely described as tax "loopholes" because by the end of the BEPS project, there wouldn't be any. Or at least substantially fewer that there were at the outset of BEPS.

However, according to new research by Source Global Research, revenues from tax advisory services have risen globally by USD5bn in the period 2014 to 2017, with revenues now surpassing USD20bn.

Brexit is expected to be a major source of work for tax advisers in the near future. No surprise there really. The Dutch Government is already preparing a Brexit tax transition law, worried that taxpayers with tax liabilities in the UK will face an "acute" tax compliance burden if Britain crashes out of the EU with no deal. It will be interesting to see – given the EU's insistence that it won't renegotiate the exit deal on the table, and the UK parliament's paralysis on the issue – how many other member states will put in place similar arrangements.

However, while Brexit, and the fall-out from a no deal scenario, will (mercifully) be a temporary affair, the BEPS implementation phase is somewhat open-ended. And what's more, tax rules and regulations around the world are apt to change on a regular basis, BEPS or no BEPS. Indeed, Source Global's report points to an increasingly complex global tax landscape as a major driver of tax advisory work looking ahead. Over USD9bn was spent on business tax management, and more than USD5bn spent on transfer pricing advice in 2017 alone. I'm not in the business of dispensing investment advice. And I'm probably not allowed to anyway. But the advisory sector's prospects are starting to look very rosy.

Interestingly, it's not necessarily the need to mitigate exposure to tax that is fuelling the boom in the global tax advisory industry, although this of course remains a major motivation. It seems that multinational companies are becoming increasingly anxious to mitigate tax risk in a world where tax authorities are becoming increasingly aggressive and willing to challenge companies' tax positions. In pushing the tax planning envelope, companies not only risk protracted legal proceedings to defend their positions, but also a reputational hammering at the hands of the mainstream media in an environment where the public is becoming increasingly tax aware (although not necessarily aware of how complex this matter is). Indeed, tax is more often being used as a political football by politicians. And often its multinational companies that are the ones being kicked.

Certainly, there's unlikely to be any shortage of work for tax advisers in the United States. The way events have conspired, 2019 could go down in history as one of the most challenging tax seasons ever, if not the most challenging. Certainly, the ingredients for this are in place: substantially revised US tax rules, which taxpayers will be filing under for the first time this year; and an Internal Revenue Service only just getting back on its feet after the longest government shutdown in history. An IRS, I might add, that struggles to cope with its bloated remit with 76,000 staff, let alone a skeleton crew. A recipe for disaster, you might say. An administrative perfect storm.

Recently, the IRS has sounded like it resembles one of those tax robots I keep warning you all about. As noted by the American Institute of CPAs in its recent letter to Treasury Secretary Steven Mnuchin and Internal Revenue Service Commissioner Charles Rettig on the matter, the IRS continues to mail automated IRS collection notices, automated warnings of asset seizures and Notices of Intent to Levy, as well as automatically transferring cases to collections. Note the extensive use of the word "automatic" here. However, attempts by taxpayers to respond to such automated notices are likely to have fallen on deaf ears, as there were no humans at the IRS to talk to. And you won't get any sense out of a robot.

Could things get any more daunting for US taxpayers? There's always the final version of the transition tax regulations (released last month) to give you a fright if you're not sufficiently spooked by all this. Or how about the battery of new tax forms and instructions relating to tax changes brought about by the Tax Cuts and Jobs Act, which were recently published by the IRS, including Forms 965, 965A (Schedules A-H), 8990, 8992, 8993, and 8996? You could write a movie about it: "Nightmare on Constitution Avenue."

About the Author

Kitty Miv, Editor

Kitty was born in Argentina in 1960 to a Scottish cattle rancher and his Argentine wife. Educated in Edinburgh and at Princeton, Kitty worked for the World Bank as an economist, where she met and married an emigre Iranian banker. During her time with the Bank, Kitty worked in a number of emerging markets, including a spell in the ex-USSR as a Transition Economies Team Leader. Kitty is now a consultant in Brussels and has free-lance writing relationships with a number of prominent economic publications. kitty@lowtax.net


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