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PwC predicts 'chaotic' future for audit

The increasingly international nature of business will lead to complications and disruptions that may plague the future of audit, according to PwC.

News Mitchell Turner 25 September 2015
— 1 minute read

A recently-released PwC report, Global Tax Transparency and Risk Management – part of the ‘Tax Function of the Future’ series – notes that the number and size of tax audits and controversies are set to increase in the near future.

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“With the unsettling of established principles and a lack of widespread use of arbitration to resolve cases, we could see a chaotic, threatening environment very soon,” noted PwC partner and former US Internal Revenue Service deputy commissioner Mike Danilack.

The report argues that as countries enact unilateral base erosion and profit shifting legislation, there is a potential increase in the amount of “complex tax disputes” that may occur, with instances of double taxation also rising.

In comments made to AccountantsDaily, Derek Ivers, PwC partner and lead of PwC Australia’s national tax reporting and strategy business, noted that an increase in the number of audits could directly impact tax rulings.

He also drew comparisons to the current European model.

“The EU want a register of tax rulings issued by countries within the EU to be disclosed, and so that might mean that tax authorities might start to become reluctant to issue rulings,” he said.

Mr Ivers added that if tax rulings form part of an organisation's risk management strategy, they may be ill-equipped to handle future audits.

“If you don’t have those rulings it means you’re heading into audit without those normal protections, or those issues resolved at that time, and again there might be the need for more audit because tax authorities have just signed off on less, moving forward,” he stated.

According to Mr Ivers, varying definitions between countries have caused issues for tax administrations in their handling of new data.

“They [tax administrations] don’t want to start bulking up their resources to start working through it and interpreting it, they probably want a technology solution themselves to manage it.”

When asked if a globally consistent standard of reporting was a realistic goal to alleviate these issues, Mr Ivers noted that it was a long-term possibility.

“I can certainly see some move towards harmonisation of those reporting items over time, to facilitate that information sharing in an economical way for tax administrations and to enable more meaningful benchmarking across the data sets,” he concluded.

PwC predicts 'chaotic' future for audit
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