Asia Pacific – Regional Economic Flux fuels demand for tax management of private wealth

In 2020, the Asia-Pacific tax market will be shaped by large-scale economic developments influencing regional patterns of investment. At the same time, the tax market will continue to be influenced by corporations increasingly seeking certainty in a turbulent and aggressive environment for tax disputes.

We expect regional economic flux in Asia-Pacific to fuel demand for tax management of private wealth in a range of growth markets – not just in China, but also in jurisdictions, such as Singapore, that are expected to benefit from capital seeking surer returns as markets continue to be preoccupied with the prospect of a global slowdown.

When hiring tax specialists, in our experience companies and individuals in the region are increasingly expecting candidates to bring local expertise with them. We anticipate that this trend will continue in 2020: tax specialists will be expected to have ever more detailed knowledge of the jurisdictional and regional tax market and legislative landscape.

Identifying these candidates will continue to prove a challenge in a tight market for tax specialists, underlining the importance of finding a partner with deep understanding of the market.

The after effects of BEPS measures continue to be felt across the region, resulting in companies shifting their TP strategies to a more defensive focus on aligning economic substance with profit-generating activity across the region.

We think that companies’ desire to ‘play safe’ will be exacerbated in 2020 by the potential for more uncertainty across the region as jurisdictions begin implementing the OECD’s new transfer-pricing regulations aimed at addressing the taxation challenges of the digitalising economy. It will be vital for taxpayers and advisers to have the capacity to act dynamically and react to rapid developments.

At the same time, we anticipate Asia-Pacific continuing to play a role at the leading edge of a major growth market in tax dispute resolution.

The OECD has long been pushing its ‘mutual agreement procedure’ (‘MAP’), whereby disputes are given over to neutral arbitration with both parties abiding by the outcome, as part of BEPS. Up to now, the MAP has had limited uptake. Though advisers and taxpayers remain unsure as to MAP’s long-term advantages over traditional dispute processes, average case resolution times in many jurisdictions are stretching out into years, and we expect this fact alone to push more corporations to explore alternative routes in 2020. In addition, new OECD guidance has made the option more palatable to many governments and corporations.

We therefore expect 2020 to see the increasing use of MAPs in Asia-Pacific. Companies will require specialist knowledge of these processes to shepherd them through the procedure. At the same time, other companies are managing their regional tax risks by hiring dispute resolution specialists, reflecting an alternative approach that is also driven by the need for risk management given unprecedented levels of change and uncertainty in the regional tax landscape.

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