G-20 Sets Sights on Tax Evaders

One of the main topics to emerge during this year's G-20 meeting has been multinational companies' use of highly complex tax minimisation systems. 

The US Senate estimates revenue losses from tax evasion by U.S.-based firms and individuals at around 100 billion dollars a year. In many other countries, the sums run into billions of euros.

China has agreed to join the international effort to combat tax evasion by signing the convention on Mutual Administrative Assistance in Tax Matters to share tax records.

Russia's finance minister Anton Siluanov said that leaders of the world's 20 largest economies are indignant over the policies of cross-border giants like Google and Amazon, who "make money in one country" but pay lower taxes elsewhere. He said that G-20 leader have agreed on a plan to take on multinational companies who tuck away their profits in offshore jurisdictions.  The plan includes ways to close loopholes and allow countries to tax profits held in offshore subsidiaries. 
 

China's Green Initiative

 

 

Jing Nealis - Global Tax Director @ Suntech Power

China’s State Council released a report announcing measures to facilitate the enhancement of domestic green industries. The plan seeks to raise domestic demand and revise its economic structure. China’s 2012 industrial development plan calls for the increase of the value of environmental protection industries to RMB 4.5 trillion (US$ 729.7billion) by 2015 – an average annual increase of 15%.

The State Council also promised to encourage technological innovation and raise the demand for green and energy-saving products in relation to environmental protection.

This plan gives great hope for the struggling Chinese solar industry!

 

Shanghai - My First Expat Assignment

In 2009 while I was working in the international tax team at the Deloitte Chicago office, the opportunity came up for me to have an expat assignment in Shanghai.

 

I cherished the opportunity to spend some time working in China. Originally I am from Beijing and after many years of being in the USA, acquiring my master's degree in accounting, working with an asset management firm and then with Deloitte, I thought it was a good point in my career to spend some time in China.

 

I had a great work experience on this expat assignment, it was great being in the middle of all those exciting deals. I had the opportunity to work directly with a partner in the firm who was also expatriated from the US to the Deloitte Shanghai office and this was also his first expat assignment. In addition to my professional skills, my Chinese language skills and the understanding of both Western and Chinese cultures gave me the ability to contribute great value to our team when serving US multinational clients operating in China and Chinese outbound investment into the USA.

 

I gained unique experiences from working on US-China cross-border transactions, I saw the rapid growth of China's outbound investment projects and US multinational clients expansion within China. I was very fortunate to be in the right place at the right time, I gained so much practical experience in a year that would have taken somebody sitting in the US office years to gain.

 

This was truly an international work experience, as I not only worked with the Deloitte Chinese & American colleagues but also with colleagues from Canada, Germany, France, UK, Hong Kong and other places.

 

Shanghai is an amazing city! It is filled with an exciting energy that I haven’t found anywhere else in the world. Though Shanghai and Beijing are very different cities with very different local cultures, I greatly enjoyed learning about the city and its unique culture. During my year-long stay there I felt completely at home walking on the old streets nicely shaded by trees planted by the French in the 1800's, looking over the Huangpu river from roof-top restaurants in converted buildings built 100 years before along the Bund into Pudong where some of the world’s tallest skyscrapers now stand, I enjoyed learning a little bit of the local Shanghaies dialect, and enjoying local cuisine such as Xiaolongbao. Shanghai is truly a place where east meets the west and where modern blends with vintage.

 

The time spent in Shanghai was too short, a year later I was chosen to be the inaugural member and the US desk manager of Deloitte's Asia Pacific International Core of Excellence (APICE) which is based in Hong Kong and provides tax advisory services to multinational companies doing business in Asia or vice versa. I felt sad to leave Shanghai, but Hong Kong was a new adventure for my career and life, so I was excited to take on the new challenging role!

 

I have been reflecting on my 7 year work experience at Deloitte in Chicago

Last year I changed positions from a manager at Deloitte to the Global Tax Director at Suntech Power.

Recently I have been reflecting on my 7 year work experience at Deloitte in Chicago, it wasn't my first job in Chicago I actually started my career by spending three years at a capital management firm in Chicago which was also an excellent experience.

I started working as an associate at Deloitte in Chicago and I left Deloitte after assignments in Shanghai and Hong Kong, at the title of manager, which was a position I was promoted early too.

I earned extensive knowledge and experience in development and implementation of strategies to manage companies' global effective tax rate while working in the Chicago office. While there I had the opportunity to serve multinational companies like Boeing, Kraft, Goldman Sachs, SPX and many more in the manufacturing, energy & resources, technology, consumer goods, and financial services industries. The various "Standing Ovation Award”, "Applause Award" and other recognition I earned while in the Chicago office are a great reminders of my time there.

While working in the Chicago office I also made many life-long friends and mentors. They taught me not only tax planning techniques, but also professionalism, integrity, technology, team work and respect. Sometimes I miss the excitement of the high pace international environment of Deloitte, as well as the great internal training they provide and our Impact Day charity events.

My new position has given me a wide range of professional experiences in which I am able to keep growing. Over the last year plus at Suntech I transformed from the person giving advice to the person actually doing it and that has been a thrilling experience.

It wasn't an easy decision to make and it took much consideration to leave Deloitte to pursue a new adventure as Global Tax Director at Suntech Power.

I really enjoyed working at Deloitte and I appreciate the rewarding experience I have been given, what I have learned during those 7 years at Deloitte will benefit me for life. 

US Corporate Tax Reform is needed!

The US politicians have been talking about Corporate Tax Reform for a long time, and it is not going anywhere. I doubt anything will get passed in the next four years during President Obama’s second term. US has the second highest corporate tax rate of 35% in the world, it is not competitive at all. Many people don’t realize the corporate taxes in the US raise only 10% of the total federal tax revenue. To restore US economic growth, the government needs to lower the corporate tax rate and provide more incentives for investments.

http://www.cnbc.com/id/100424136

 

Corporate Tax Reform Would Restore US Economic Growth: FedEx CEO

Fred Smith, FedEx chairman & CEO, discusses jobs creation and the importance for companies to remain innovative. Reforming the "dysfunctional" U.S. corporate tax system should be the top priority in the federal government's efforts to restore economic growth, FedEx Chairman and CEO Frederick Smith told CNBC this week.

 

"If you look historically, what creates growth and wealth is innovation and investment, and increase in scale — more customers," he said in a "Squawk Box" interview. "The United States tax system today is very prejudiced towards financialization, leverage, and lack of investment."

 

On Wednesday, the government reported that the nation's Gross Domestic Product (CNBC Explains GDP) dropped 0.1 percent in the fourth quarter — the first negative-growth reading in more than three years.

 

A day after the GDP release, Smith said, "What needs to be done to restore growth is very straightforward. And that's change the U.S. corporate tax system. It's very dysfunctional and it … [holds back] investment. And investment, in turn, is what creates GDP growth and jobs."  The U.S. economy will growth at a rate of about two percent this year, he predicted. "[But] that simply won't re-employ ... millions of Americans."

 

"We need to … lower the corporate tax rate, take out all of the special deals and deductions and so forth, and provide an incentive for investment," added Smith, who is part of the Business Roundtable (BRT), a CEO lobbying group.

 

The BRT invited President Barack Obama to address its members in December. "The president came to the Business Roundtable not long ago," Smith recalled, "[and] stated unequivocally that he's for corporate tax reform, including a lower rate and a modified territorial system."

 

Republicans have long-sought to change the corporate tax code. "It's the politics that keeps it from getting done," said Smith, who was a supporter of Mitt Romney in the 2012 presidential election.  The issue of overhauling corporate taxes had emerged as a possible negotiating point in the talks at the end of last year to avoid the "fiscal cliff."

 

But it never became part of the final deal, which included higher taxes on wealthier Americans and an agreement to postpone automatic spending cuts, known as "the sequester," until March.  With about a month left, the president and Republican leaders are still far apart on a compromise plan to replace those across-the-board spending cuts.

 

But during this past week, the complicating factor of raising the debt ceiling — a move Republicans had refused to support without matching spending cuts — was taken off the table until May.

 

Recognizing that waiting and worrying about Washington is not a business plan, Smith said, "I think companies have decided to move on. FedEx is investing this year, in our fiscal year that ends May 31, about $3.9 billion."

Speech at the 2nd China Tax Director Conference

On December 13-14 of 2012, I was invited to speak at the 2^nd China Tax Director Conference & GTS-Thomson Reuters China Tax Awards. This event is the largest and more influential tax conference in China which attracted high-level tax directors and professionals from all over China. It is an excellent platform for tax professionals to share their practical experience on new technical developments, tax management, talent management, cooperation with china tax authorities etc. Corporate trainings, whether external conference like this or internal / on-the-job training, are critical to help the tax professionals be on top of the latest developments. Here is the link to the conference: http://gts.goldenfinance.com.cn/20121213/en/index.html

 

Jing Nealis at the 2nd China Tax Director Conference & GTS-Thomson Reuters China Tax Awards

 

I shared my global tax experience and view on Risk Management for Transfer Pricing. In recent years, Chinese tax authority has been paying more and more attention to transfer pricing issues. In 2010, tax revenue generated from Transfer Pricing related investigations was approximately RMB 3 billion. In 2011, the tax revenue generated from anti-avoidance related adjustments was as high as RMB 27 billion in China. In addition to the traditional buy-sell related party transactions, the tax authorities are putting more effort into areas around intangible property transfer, equity transfer and thin capitalization etc. For tax VPs and Directors, Transfer Pricing Risk Management is becoming more and more important!

 

From my experience, I think the rules of the road for Transfer Pricing Risk Managements are:

1. Fully understand your company’s business model including the risk, function and assets of the relevant subsidiaries and allocate the profits accordingly.
2. Diligently prepare all the internal legal documents related to the TP arrangement.
3. Gather the market and industry information.
4. Carefully prepare the Transfer Pricing documentation.
5. Periodically assess the Transfer Pricing risk and take actions to reduce the risk.
6. Effectively communicate with the local tax authority about your company’s business model and relevant information.

The rapidly changing Chinese tax and regulatory environment requires companies to react fast and manage their risk appropriately. The Global Tax Director position is becoming more and more important for Chinese multinational companies and CFOs. As a global tax director, I face various challenges while managing the tax issues across three regions – North America, Europe, and Asia Pacific. My goal is to make the tax function a value-added department and a contributor to the overall corporate strategies.

 

I look forward to the challenges ahead!