Firms grapple with red tape
Globalisation turned our world into a global village. Multinational companies do business across various time zones and tax jurisdictions.
Now a report by a Big Four accounting firm shows that companies with operations in various countries are struggling to comply with increasing regulation and the growing complexity of global financial and tax reporting.
Mainland companies 'going-out' or 'going global' should prepare with proven governance and reporting structures and compliance practices in order to avoid any repercussions.
'Around 30 per cent of participants at an Ernst & Young tax conference, who were mostly tax executives working on the mainland, indicated that they had experienced business interruption due to lack of compliance in one form or another. The need to better prepare for the more stringent reporting and compliance requirements also applies to regional headquarters of multinationals in Hong Kong,' says Agnes Chan, regional managing partner of Hong Kong and Macau at Ernst & Young.
The Ernst & Young report is based on a survey of more than 200 finance and tax executives from the Fortune Global 500 and Forbes Global 2000 companies.
The report investigates significant developments taking place as multinational companies determine the best way to meet their financial reporting and tax obligations worldwide. Loretta Shuen, Asia-Pacific leader of business tax compliance services at Ernst & Young, points out that with an accelerating pace of mainland enterprises investing overseas, the building of requisite governance and reporting structure and compliance practices worldwide is an area that should be considered a priority.
Central government statistics indicate that China's outward foreign direct investment net flows increased from US$21.16 billion to US$68.81 billion between 2006 and 2010.
With a growing number of footprints in other countries, Chinese enterprises, especially PetroChina, Sinopec, China State Construction and mining companies, are facing substantial regulation and compliance risks.