Tax Reform Looms as Key Post-Election Issue for Tax Directorsby
Though a lot could change between now and November, the second annual BDO USA Tax Outlook Survey indicates that tax directors at public companies already rank tax reform as one of their key concerns for the presidential election aftermath.
If the next president is a Republican, 77 percent of directors surveyed think tax reform legislation will be passed. With a Democrat in the White House, 33 percent believe tax reform will be enacted.
For now, though, only one in five (21 percent) tax directors say planning for a tax code overhaul under the next president is their key tax concern. (Interestingly, the study cites a recent ABC News/Washington Post survey that indicates only 6 percent of GOP-leaning voters and 4 percent of Democrat-leaning voters say taxes are their biggest issue.)
“The real challenge for businesses in an election year is planning for uncertainty,” Matthew Becker, partner in the National Tax Practice at BDO USA LLP, said in a prepared statement. “The recent vacancy on the Supreme Court has only heightened the partisan divide. However, the compromise to make permanent a number of important tax extenders reached at the end of last year may portend additional opportunities to find common ground.”
So, what are some other top tax issues on directors’ minds?
- About half (48 percent) cite international tax planning and the Base Erosion and Profit Shifting initiative.
- Attributional nexus concepts drew 15 percent of tax directors’ concerns.
- Increasing scrutiny on foreign earnings was close behind with 12 percent.
- Drawing the least amount of concern were taxes on cloud transactions (3 percent) and tax benefits, such as carried interest (2 percent).
Concerns, however, don’t mirror desired goals. The following six issues were on survey respondents’ wish lists.
- Almost half (41 percent) want the US corporate tax rate cut.
- About a quarter (20 percent) want a shift to a territorial tax system.
- Almost the same (19 percent) want a simplified tax code.
- Twelve percent want tax incentives to repatriate foreign earnings.
- Four percent would like the “Cadillac tax” on high-cost health plans to be repealed.
- Two percent of respondents wish for lower taxes on capital gains.
Finally, we couldn’t possibly leave out compliance issues, right? And it’s a biggie, as expected, with the majority (63 percent) of tax directors reporting that compliance costs for tax and regulatory issues rose in the past year. A third (34 percent) of directors said avoiding material misstatements of income taxes was the most challenging aspect of financial reporting, while 27 percent cited deadlines for interim and annual income tax reporting.
Recruiting and retention earned a spot on the gripe list, with 25 percent of directors citing the difficulty in finding and keeping professionals who handle financial reporting of income taxes.
And 15 percent said it was tough to stay current on accounting standard changes and proposals.
Terry Sheridan is an award-winning journalist who has covered real estate, mortgage finance, health care, insurance, personal finance, and accounting and taxation issues for newspapers, magazines, and websites. A Chicago native and former South Florida resident, she now lives in New England.