Four in five U.S. tax executives expect their total tax liability — the sum of all taxes across the entirety of their organizations — to increase this year, according to a 2020 tax outlook survey released Wednesday by the accounting network BDO.
When tax reform legislation was passed in December 2017, many businesses cheered the reduced corporate tax rate and other provisions intended to boost American companies.
BDO said the expected increase in total tax liability in 2020 points to the degree of tax complexity at every level, starting with federal tax reform.
Tax professionals in the survey identified the need to adjust to continued guidance on federal tax reform as their biggest tax challenge in 2020. Moreover, 97% of those surveyed said further changes were likely following the November presidential election, with 55% expecting this to occur regardless of who is elected.
"As we enter a new decade, the tax environment is more complex than it has ever been — and complexity is accelerating rapidly," BDO's national managing partner of tax, Matthew Becker, said in a statement.
"To thrive in these circumstances, tax professionals need to focus on understanding and optimizing their total tax liability, and ensure taxation is factored into broader business strategy."
Rabin Research Co. polled 151 senior tax executives in the fourth quarter at companies with revenues ranging from $100 million to $3 billion.
Digital Economy
The survey found that further changes to the tax code were not tax professionals' only concern. Tax authorities at every level are trying to get ahead of the ascendant digital economy, which has fundamentally altered the way business is done.
BDO noted that the U.S. Supreme Court's decision in South Dakota v. Wayfair gave a green light to states to enact economic nexus standards, which consider criteria other than physical presence in evaluating a seller's connection to a state.
In response, tax professionals have had to reevaluate their processes. Sixty-one percent of survey participants reported that they had upgraded their state and local tax technology.
On the international side, countries are starting to come together to attempt to standardize the way digital services are taxed across borders.
