Contributed by Peter Ratcliffe on 07 March 2014
Following the financial crisis, many corporates and financial institutions are turning their attention to the more rewarding Asian markets.
This is scarcely surprising given that tax authorities in the European Union and United States are ever more vigilant and the prospect is for further regulatory control. By contrast, Asia is enjoying the benefit of a less restrictive legislative approach; however the dynamics of tax in Asia are very different to the more mature markets of Europe and the US.
With generally low tax rates and only a recent move to internationalise regional tax systems through an expansion and clarification of Double Taxation Agreements, tax has traditionally been viewed as a sub-set of finance. As a result, tax professionals in Asia have historically performed compliance focused roles with less of an advisory or international component than their peers elsewhere. In-country tax compliance is often handled by the finance functions and many businesses have yet to create a separate tax team.
Nevertheless, the profile and complexity of tax roles in Asia are increasing steadily as a result of growing awareness of the impact of tax for outbound businesses. This has led to significant inward investment from Global MNCs with an engrained and proactive approach to managing tax, combined with stronger, more specific regulations across the region. Consequently, tax functions are being created, or built out, within growing businesses (Asian and International MNCs) to be more proactive with respect to tax planning opportunities and to reflect that Asia revenues are, or are anticipated to be, an increasing proportion of total income.
Financial Services is by far the most mature sector in Asia with sizeable tax functions and a clear structure across the front, middle and back office and a similar profile to corresponding functions in EMEA and the Americas.
Hong Kong and Singapore are still the regional hubs for international business and have the highest populations of tax professionals across professional services and in-house. Shanghai and Beijing have also quickly become sizeable markets for tax professionals as corporates and professional services firms localise their China tax capability.
However, with perceived difficulties operating in China and India, due to greater regulatory control and a more aggressive approach to taxation, corporates are increasingly looking towards South East Asia (Vietnam, Malaysia and Indonesia in particular) for their emerging markets investment.
For more information on tax opportunities in Asia or expanding your operations in the region, please contact one of our consultants.