Tax complexity threatens companies: new study causes a stir!

Tax complexity threatens companies: new study causes a stir!

Tax complexity has become a growing threat to the economy and society. This is supported by extensive research work by the Collaborative Research Center/Transregion TRR 266 “Accounting for Transparency” at the University of Paderborn and the LMU Munich. The researchers have it Tax Complexity Index developed that analyzes the challenges faced by multinational companies worldwide.

What is particularly interesting is that an article in the US magazine “Forbes” focuses on increasing tax complexity and the importance of the Tax Complexity Index. The latest evaluations show that tax complexity in the 38 OECD member states has been steadily increasing since 2016. This development not only has an impact on large companies, but also significant negative effects on smaller and medium-sized companies, such as Prof. Dr. Caren Sureth-Sloane explains.

Growing bureaucratic hurdles

Researchers emphasize that increasing tax complexity creates economic burdens. This applies in particular to transfer pricing regulations that affect internal transactions between affiliated companies in different countries. In addition, complex tax regulations, for example in the area of ​​corporate restructuring and the fight against abusive tax practices, significantly increase the challenges for companies.

Companies are also faced with a lack of transparency in tax audits, which is considered one of the key factors of uncertainty. The clarity and transparency of the tax regulations as well as reliable administrative processes are essential for innovation and investment activity in the affected companies.

Tax Complexity Index and its meaning

The Tax Complexity Index has been updated every two years since 2016 and is based on surveys in nearly 100 countries. A distinction is made between two types of complexity: theTax Code Complexity, which describes the difficulty of the tax laws, and theTax Framework Complexity, which results from the processes for fulfilling tax obligations. This complexity directly affects the efficiency of tax compliance.

In addition, there are numerous specific regulatory requirements that contribute to tax complexity, such as regulations onTransfer pricing, which aim to prevent excessive pricing. Special taxes, such as minimal corporate taxes or local levies, also increase the complexity for multinational companies.

This comprehensive research and analysis provides valuable insight into the ever-growing challenge of tax complexity and its impact on businesses and society at large. The OECD's promotion of sustainable economic growth, stable prices and social progress provides another framework in which these themes unfold.

For further information on the topic of tax complexity and its effects, see the IW Cologne report, which offers detailed analyzes of corporate taxes in an international comparison IW Cologne.