is BEPS having on intellectual property (IP), and
the ability of MNCs to move people and assets across
borders, given BEPS’ transfer pricing rule changes?
Bertolino: Intangible taxation is at the very heart of
the BEPS project and focused on aligning taxation
with value creation as conceptualized by the OECD.
The OECD’s intent through BEPS is the requirement
for taxpayers to identify and document their intangible
assets more explicitly, which means that there will
be much more visibility in future for tax authorities
on the intangible assets driving business value and
taxable profit. Ultimately businesses have to know
what relative contribution each function makes to their
value chain and, as a result, value chain analysis and
monitoring will be critical going forward.
The changing rules under BEPS require MNCs to
review their entire business models more precisely and
in greater depth than the historic norm to avoid material
risks of added tax. Under BEPS each intangible will
need a name and description, and who is entitled to
the return. At the same time, this lens on all assets and
risks can also provide an opportunity for organizations
to reshape corporate strategy and reporting around IP.
The creation of a strategy to manage intangibles and to
tie them to Development, Enhancement, Maintenance,
Protection and Exploitation (DEMPE) functions as the
business adapts and changes can help determine the
entitlement to the intangible related return.
: What impact is BEPS having on your
clients’ tax departments now? Traditionally, tax has been
a black sheep area nominally under the CFO’s tutelage
but always quite separate from the rest of the finance
functions. Is BEPS changing that internal corporate
dynamic for tax departments, for instance leading to
greater centralization of tax functions across borders?
Mealey: In today’s dynamic environment, organizations
must not only have the infrastructure—talent,
technology, policies and processes—in place to
manage legislative change, but they also need to be
agile and have a culture that embraces a greater degree
of transparency. Actual levels of tax risk and the
perception of tax risk at board and investor level have
increased greatly. As a consequence the tax function
has both increased in importance and also may be
subject to greater levels of non-technical review and
scrutiny. We are seeing tax leaders being elevated within
organizations and increased board involvement in their
company’s tax strategy is more prevalent, particularly
against a backdrop of greater public disclosure, more
widespread interest in the tax affairs of corporations and
reputational risk mitigation. We are seeing that more
heads of tax are spending a disproportionate amount of
time on tax policy and how it impacts their company.
Effective ongoing communication between a
company’s tax and finance leaders, the C-suite and the
board is essential, and as a result of BEPS there is a
growing need for organizations to centralize elements
of the tax function. Effective automation of processes
requires a coordinated approach and centralization also
promotes consistency, which has become significantly
more important because of increased transparency,
information sharing and controversies involving
Managed services and outsourcing is also an
interesting piece that is gaining greater traction. The
pace of legislative change globally combined with
the application of disruptive technologies makes
it inevitable that going forward companies will
increasingly look to third party providers with leading
tax expertise, a global infrastructure and tax talent
that enables them to confidently outsource certain
core tax functions without disrupting their operations.
Indeed, the level of tax outsourcing is estimated to
stand at about $25 billion in 2016 and is expected to
grow as much as five percent per year through 2021.
Once strategically defined, models like BPO can help
the tax function and organization adapt to changing
business and regulatory environments in a scalable and
cost-effective way. They also allow organizations to
focus on the core aspects of their tax business while
delegating administrative and back-office functions and
enabling internal talent resources to be deployed on
more business-critical and value add work.
: BEPS is obviously tied to politics –