Tax talks: 75% of companies worldwide shocked by more aggressive tax audits

Better beware as 97% of tax administrators say they will increase focus to scrutinize tax transactions in the next three years.

According to Ernst & Young’s new 2011-2012 tax risk and controversy survey, seventy-five percent of companies in the survey say they have experienced a rise in the volume or aggressiveness of tax audits. Ninety-seven percent of tax administrators also say they will increase their focus on tax risks related to international structures and cross-border transactions in the next three years. For companies, transfer pricing and indirect tax lead the list as the top two tax risk issues, and 57% of tax administrators also identified transfer pricing as their leading tax risk focus area.

This increase in tax enforcement will be aided by a broad range of new requirements for business taxpayers to disclose more information to the taxing authorities. Seventy-eight percent of tax directors and CFOs report that they have experienced an increase in disclosure and transparency requirements made upon their company in the last two years. These percentages increase with US-based companies at 83%, China-based respondents at 85% and Brazil-based respondents at 88%.

Mark Weinberger, Global Vice Chairman – Tax at Ernst & Young, said:
“Countries are looking for more from their tax systems as they struggle to get control of their budget deficits. Tax administrators have plenty of new tools and unprecedented access to information. We’re now seeing evidence they will be scrutinizing taxpayers more closely for years to come.”