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Based on our most recent Asia Pacific tax survey, China again ranks number one as the country that provides the greatest tax challenges both today, and prior to 1997. Not surprisingly, India was second. These results reflect the levels of economic activity and investment in China and India, as well as the complexity of local laws and practices in these countries.
While China remains the most challenging country, transfer pricing remains the one area of taxation that presents the greatest risk for tax functions with 62% of respondents identifying it as high risk. This result is not unexpected given the uncertainties created by transfer pricing practices in Asia and the difficulties and costs associated with risk management strategies, such as advance pricing agreements. Pre-1997, transfer pricing was still an area of concern, but its risk profile has increased over the years.
With the focus on globalisation, companies are encountering issues around repatriation of profits, financing and management, and service fees. The related tax issues associated with these activities all rate highly as areas of challenge for companies in the Asia Pacific region. The number one challenge for tax functions is compliance with tax laws, and practice. This is expected at a time when there is a high focus globally on risk management and compliance.
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