Warning over lack of global compliance
Financial and tax reporting is becoming increasingly challenging for multinational companies, according to a report by auditor Ernst and Young.
More than 200 finance and tax executives - working for either Fortune Global 500 companies or Forbes Global 2000 companies on global compliance and reporting - were surveyed earlier this year
And more than half of them said their companies had gone through unplanned tax audits in the past 12 months and 42 per cent had to pay tax penalties. Almost a fifth said they suffered business interruption because of lack of compliance.
More than 40 per cent indicated a lack of global governance over statutory financial filings, and more than 60 per cent said there was no global governance over direct and indirect tax filings required by their companies. The top risks of not having a global compliance framework were incomplete or inaccurate data, additional cost of compliance and reporting, and also penalties and additional tax burdens.
Only 10 per cent of the companies surveyed have headquarters in the Asia-Pacific region. The rest are in the Americas, Europe, the Middle East, India and Africa.
Agnes Chan, regional managing partner for Hong Kong and Macau at Ernst and Young, said mainland companies that wanted to go global were also faced with a pressing need to improve corporate governance and tax and financial reporting compliance in order to avoid risks.
'Mainland companies ought to be aware of the need to streamline, standardise, automate and centralise finance and tax reporting,' she said.
Mainland firms going global were characterised by their massive scale, which usually involved operations in more than 100 countries, she said. Even if they only had a few problems in the area of tax and finance reporting, compliance could cause significant time and money penalties.
Asian countries notorious for complicated tax and finance reporting structures are India, Indonesia, South Korea and the Philippines. Globally, problems can occur in Brazil, Russia, South Africa and North African countries where mainland companies are active in infrastructure and the natural resources and telecommunication sectors.