Latin America has been the hotbed in the fight against corporate tax corruption, but the current wave of crack downs against transfer pricing is global in scale. Momentum against tax loopholes that allow companies to avoid tax liabilities is expanding rapidly – from cross-border efforts in Latin America to global country-by-country (CbC) reporting requirements. Finance teams, take note – tax compliance and automation should be your top priority as governments worldwide continue to gain increased visibility into your financial records.
Not unlike the recent story out of Mexico, where millions of dollars in tax refunds were withheld from companies like Unilever and Colgate, Italy has also recently made news in its fight against tax fraud. Apple Inc.’s Italian subsidiary recently agreed to pay $348M USD following a tax investigation. While Apple argues that it accurately paid all of its tax obligations, Italy reports finding a large discrepancy between Apple’s revenue and taxes paid in the country.
Critics accuse Apple of capitalizing on a corporate structure that allows it to reduce tax obligations by claiming revenue and profits in low-tax countries – like Apple’s European headquarters in Ireland, which has the lowest corporate tax rates in the European Union. Such accusations aren’t unique to Apple; they plague multinationals worldwide and were the impetus behind the CbC requirements rolling out this year.
As governments continue to look for ways to maximize their tax collections – from e-invoicing to cross-border visibility to CbC – corporations can expect to see more and more examples similar to Colgate, Unilever and Apple. Global tax automation is an essential component to financial processes as multinationals seek to comply with these new reporting requirements and ensure that their reports hold up in light of this increased scrutiny. Automation between financial transactions and tax reporting is the only way to:
- Eliminate the risk of inconsistencies
- Protect against human error
- Avoid unauthorized transactions
- Confirm invoices, receivables, payables, tax records, etc., are all in alignment
- Ensure the accuracy of tax deductions
- Decrease audit risk
- Maintain accurate, accessible records in the event of an audit
- Streamline tax reporting processes
As countries worldwide take their tax collections to a new level, corporations must prepare for an increased level of scrutiny, or risk losing millions in fines, penalties, back taxes and lost productivity. Contact us to learn how companies like Kellogg’s, Philips and The Coca-Cola Company are partnering with Invoiceware to automate compliance and reduce these risks.