International efforts to crack down on tax avoidance could heap more red tape and costs on the North Sea oil and gas industry, accountancy network RSM has warned.
It surveyed nearly 500 senior bosses in a range of sectors, finding more than three-quarters of UK middle market firms which operate internationally expect to pay more tax as the result of an Organisation for Economic Co-operation and Development (OECD) action plan.
According to RSM, the impact on Aberdeen could be significant due to the large number of medium-sized oil services companies that work internationally through trade, subsidiaries and branches.
Campbell Reith, tax partner at RSM UK in Aberdeen, said: “The global tax avoidance debate has to date focused on the actions of very large multinationals.
“What the survey responses confirm is that the co-ordinated global crackdown to tackle those actions will hit many middle-sized and smaller businesses, particularly those in Aberdeen due to the international nature of business in the city.
“The costs could be significant as respondents expect both increased effective tax rates plus additional compliance costs.”
He added: “Given the current challenges in the oil and gas sector, an increased tax bill is the last thing that Aberdeen businesses need.
“Many of these organisations may lack the in-house resource available to the largest multinationals, so the costs could be disproportionately higher than for the larger corporations that have been in the public spotlight.
“Aberdeen businesses would do well to think about BEPS (OECD’s Base Erosion and Profit Shifting action plan) as being about more than tax; it is about having the right business model and operating it in a structured and organised way.”
RSM said 72% of middle market bosses in the UK expected to pay more tax as uncertainty around how the BEPS rules will be implemented hits UK boardrooms.
Globally, 41% of middle market businesses – defined as having revenues from £35million to about £700million – expected their tax burden to grow by up to 10%, with 31% expecting it to increase by more than 10%.
RSM found many of these organisations planned to bear the brunt of the added costs, but would pass on some to shareholders and customers.
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