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

By Rob Starr, Content Manager, Big4.com

According to a survey announced yesterday 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.

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.

On average, survey respondents estimate a 23% effective tax rate on non-US earnings, while the US corporate income tax rate is 35% excluding state taxes, which could underline the frequent call for lowering the rate and expanding the base to remain globally competitive. As government leaders show signs of listening to that call, expectations have increased. Sixty-eight percent of US multinationals surveyed expect fundamental international tax reform.