Tax reform is widely expected under the Trump administration by the corporate tax executives polled by BDO USA in a new survey.
BDO’s 2017 Tax Outlook Survey polled 100 tax executives at public companies across the U.S., and found that 100 percent of the surveyed tax executives believe tax reform is likely to happen under President Trump, while 60 percent of the poll respondents said tax reform is very likely.
However, one thing the tax executives aren’t so sure about is Congress, with just over half of those surveyed, 51 percent, predicting congressional gridlock will be the primary obstacle to tax reform over the next four years of Trump’s administration. Others foresee potential obstacles in conflicting legislative priorities (19 percent), public opposition to proposed reforms (13 percent) and international actions related to multinationals (12 percent). Only 5 percent of the respondents believe the outcome of the 2018 midterm election will stall tax reform efforts.
For 34 percent of the tax executives polled, planning for tax reform under Trump is their primary issue, up from 21 percent last year. Meanwhile, 40 percent of the survey respondents said reducing the corporate tax rate from 35 percent is their greatest tax reform priority. Twenty percent of the survey respondents see tax incentives to repatriate foreign earnings as a top interest, while 17 percent cited a shift to a territorial tax code.
The percentage of respondents interested in lowering the tax burden of capital gains was 9 percent, an increase from 2 percent last year. Only 2 percent of the poll respondents cited changes to the tax treatment of carried interest as their primary concern.
“Despite the widely-debated initiatives discussed during President Trump’s first months in office, steering federal tax reform is more like an aircraft carrier than a speedboat. It takes time and effort to change course,” said BDO USA tax partner Matthew Becker in a statement. “Any changes that do come to pass may look significantly different than what’s being proposed today, so businesses should stay abreast of how the potential outcomes could impact their bottom line and remain ready to pivot their tax planning strategies when important developments arise.”
The tax executives were also asked about international tax planning, including the Organization for Economic Cooperation and Development action plan designed to address tax base erosion and profit shifting, also known as OECD BEPS. The highest proportion of those surveyed (35 percent) said international tax planning, including BEPS, is their primary tax issue for 2017. BEPS recommendations around transfer pricing generated the most concern among the tax executives polled, cited by 51 percent of respondents. The poll found 76 percent of the tax executives surveyed currently include transfer pricing mechanisms in their tax strategy.
A 57 percent majority of the respondents indicated they are already taking steps toward implementation based on the OECD BEPS Action Item drafts. However, 35 percent of the respondents plan to wait for individual countries to implement BEPS measures before they act. Despite the uncertainty around implementations, some BEPS reporting rules have already taken effect, with country-by-country reporting rules beginning for tax years starting on or after Jan. 1, 2017. The poll found 91 percent of the tax executives surveyed expect to meet the initial country-by-country reporting deadline at the end of 2017.