Tax investigations and disputes across borders

We are continuing to see an increase in large-scale tax investigations and disputes across the globe.

In light of the macroeconomic background, this is perhaps not a surprise – with the global economy having faced a number of successive crises, and governments across the world under pressure to raise revenues without increasing the tax burden on individuals, we’ve seen tax authorities take increasingly robust positions against large corporates in tax audits and assessments.

This is not a trend we expect to reverse in the foreseeable future.

There are a number of other developments in the contentious tax space that also contribute to the increasing risk to large businesses.  For example, we are seeing:

• increasingly sophisticated audits of transfer pricing and tax structuring within multinational groups;
• increased scrutiny by tax authorities of taxpayers’ motives and management incentive plans, with arrangements and structures being challenged that might previously have been viewed as benign;
• an ever-growing volume of information about taxpayers being shared internationally, contributing to tax authorities being increasingly willing and able to co-operate with their foreign counterparts; and
• an increased willingness by a number of tax authorities to use, or threaten to use, their criminal powers.

Against that backdrop, we strongly believe that understanding how tax investigations and disputes work as a practical matter, and the potential consequences that may arise should such conflict with a tax authority occur, should be seen by businesses as an important part of their decision-making processes.

To help facilitate that, we have prepared a guide exploring the contentious tax framework in nine key jurisdictions across Europe and the US.  This guide, written in Q&A-style for maximum readability, considers topics including:

• key trends in tax disputes;
• tax authorities’ information disclosure powers;
• procedural requirements for appealing tax assessments;
• the imposition of civil penalties, and criminal liability, on taxpayers; and
• the interaction between tax authorities in different jurisdictions.

It also includes a checklist of detailed questions that could be asked of local tax advisors, should businesses need to build a similar picture of the rules in other jurisdictions.

To view the full guide – or quickly prepare a bespoke report, filtered to show only specific jurisdictions and/or questions – please click here.

Members of our international tax investigations and disputes team will be exploring some of these topics in greater detail in a series of blog posts over the coming months, starting with the risk of criminal tax liability for companies with European operations.  Once published, these materials spotlighting key issues in the contentious tax space will be available at the link above too.

If you would like to discuss in further detail any of the points raised in the guide or additional materials, please contact our tax investigations and disputes team or your usual Freshfields contact.