Ernst & Young: Signs of US-targeted corporate investment and growth

By Rob Starr, Content Manager, Big4.com

Corporate tax professionals foresee strong potential for US investment and growth in 2013. According to a survey announced today at Ernst & Young LLP’s 31st Annual International Tax Conference, 30% of tax executives in US-based multinational enterprises consider North America the most likely region for corporate investment, second only to Asia Pacific (42%) and twice as likely as Europe (14%). The Asia Pacific region includes China, India and Australia, among others.

From around the world, the companies represented in the survey have not always focused on US growth. On average, about half (51% mean; 50% mode) of their pre-tax income is currently earned outside the US.

Mergers and acquisitions also show signs of potential investment and activity. Almost two-thirds (65%) expect their company to conduct at least one significant corporate transaction in the coming year. Of those, 80% anticipate an acquisition, 44% a disposition and 16% a spinoff or split up.

Whether to support growth or to acknowledge growing tax complexity, 46% of survey respondents expect the tax function to hire in the next year, most of whom will add staff in North America (84%). Tax hiring may also be a result of increased responsibility. For example, 56% of respondents say that tax is responsible for indirect taxes, a growing trend.

Consistent with previous polls, the top three goals for tax departments in 2012 are effective tax minimization, cash tax savings and accounting for income taxes including the resulting implications on financial statements.

Among respondents who say tax reform has had an impact on their tax planning, 65% modified their planning to aim for consistency with possible reform, or at least become flexible to transition to consistent strategies. Thirty-seven percent pursued planning projects specifically in preparation for reform.

Fifty-nine percent of survey respondents are currently operating or contemplating centralized supply chain functions, led by procurement (72% of those centralizing) and services (61%), followed by 48% who are centralizing manufacturing management functions such as demand planning and quality control. Another 37% are centralizing sales and distribution systems.