A global survey of 3 500 businesses in 40 countries has found that 81% of executives worldwide believe the implementation of a proposed new intergovernmental action plan to shape equitable international tax systems will not be successful.

The 15-point international tax action plan, which was developed by the Organisation for Economic Cooperation and Development (OECD) and termed the Base Erosion and Profit Shifting (BEPS) Action Plan, called for the development of tools that countries could use to shape “fair, effective and efficient tax systems”.

This would be based on three core principles – coherence, substance and transparency. 

As South Africa was a member of the Group of 20, the organisation that mandated the OECD to develop the BEPS Action Plan, it endorsed the plan, to the extent that the South African Revenue Services had representation of all 15 of its elements.

The survey, which was conducted by advisory firm Grant Thornton and polled 150 executives in South Africa, revealed that 64% of South African business leaders would welcome more global cooperation and guidance from tax authorities on what was acceptable and unacceptable tax planning, even if this provided less opportunity to reduce tax liabilities across borders.

But Grant Thornton Johannesburg tax services partner and transfer pricing head AJ Jansen van Nieuwenhuizen said on Monday that, while there appeared to be an appetite from South African businesses to obtain clarity regarding cross-border tax rules, once the detailed complexities surrounding a BEPS action plan were better understood by South African executives, they may also become opposed to its implementation.

“BEPS describes tax planning strategies that take advantage of gaps and mismatches in tax rules. These approaches make profits ‘disappear’ for tax purposes or divert income to locations where the prevailing rate of corporate tax is low, but where the company carries out little or no real activity,” he said.

Any South African multinational corporation or company that joined a multinational group was exposed to and affected by BEPS.

The survey further revealed that, although there was a “great” sense of countries working together at the start in support of the BEPS Action Plan, it appeared that as the project progressed some countries were “stepping back” from consensus.

“A key concern is that the proposals could have a disproportionate impact on midsize multinationals, as few have the resources or capabilities to comply and adapt in the envisaged timelines. Companies relying on the development of ideas, innovations and creative content are particularly affected,” Jansen van Nieuwenhuizen commented.

He added that there were indications that many countries would only implement selective changes, giving rise to added complexity and compliance burdens for business.

“What seems clear right now is that real convergence and consistency are inconceivable and, without this convergence, the burden on business will only increase, with even greater complexities developing in the tax system between countries and companies,” he cautioned.

Grant Thornton tax services leader Francesca Lagerberg noted that the plan was set to add yet more complexity to an already fast-changing and politically fraught tax landscape.

“We urge all companies to develop a clear understanding of what the proposals mean for their business. It's not too late to engage in shaping the final form of these proposals, which will evolve and be refined over the coming months and into next year,” she said.

According to Jansen van Nieuwenhuizen, while many of the objectives of the plan were valid, the concern was that the scope had broadened to such an extent that it would affect almost every area of international taxation.

“It’s as if, in an attempt to reduce traffic congestion in a handful of intersections, the authorities have decided to overhaul the entire road network [and demand that] every driver modify their car,” he explained.

To meet tougher permanent establishment stipulations, businesses would need to demonstrate that people and structures were there to support the bearing of risk.

Grant Thornton on Monday launched 'Getting to grips with the BEPS Action Plan', a new online report into what the planned overhaul of the international tax system meant for businesses and how they could prepare for such changes.