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The challenges that arise when seeking to resolve a dispute with a tax authority have changed significantly in recent years. We see three common themes developing internationally:
- Paying the ‘right’ amount of tax - business tax affairs remain in the public spotlight, with the boundaries between tax planning, tax avoidance and tax evasion becoming the subject of significant political and popular debate. Tax disputes need to be resolved on a legally sound basis, but that resolution must also stand up to external scrutiny from a number of different audiences. The exchange of information between authorities means that the answer needs to stack up in all affected jurisdictions. And the EU State aid challenges have seen long-settled issues being unpicked in a new environment.
- Pressure on tax authorities - tax authorities across the world are under pressure to do more (and be seen to do more) to make sure taxpayers pay the “right” amount, and are being provided with an increasing arsenal of tools to achieve this. Taxpayers may be required to pay all the disputed tax and additional penalties upfront. In Europe there is an increasing use of powers of arrest or unannounced ‘dawn raids’, and an extension of criminal sanctions to those facilitating tax evasion by third parties.
- The broader relationship - increased transparency raises interesting reputational and relationship issues. For example, a transfer pricing case about the value or relative worth of individuals or operations in different jurisdictions can make employee messaging (and remuneration) difficult or lead to political or public reaction (and potential brand damage).
This publication is reproduced with permission from Law Business Research Ltd. Getting the Deal Through: Tax Controversy 2017 (published in September 2016; contributing editor: Richard Jeens, Slaughter and May) For further information please visit www.gettingthedealthrough.com.