World's elite gathers for Davos 2014

Global tax system 'needs overhaul', say CEOs at Davos

Chief executive officers from around the world have called for an overhaul of the international tax system and warned that current plans for change were likely to fail, according to a new survey.

The survey — released by PricewaterhouseCoopers (PwC) Tuesday at the World Economic Forum in Davos — said that the international tax system has fallen short in the eyes of chief executives around the world.

"Nearly two-thirds of CEOs say the international tax system is in need of overhaul," it said.

"Notably, 75 percent of CEOs say that being seen as paying a 'fair share' of tax is important to their company."

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The annual survey, the 17th time it has been released by audit firm PwC, compiles 1,344 online responses from global CEOs in 68 countries during the last quarter of 2013. CEOs from Blackstone, HSBC, Coca-Cola and UBS were just some of the survey's notable contributors.

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The results showed that most CEOs say that when it comes to tax, policies and the competitiveness of different regimes are key factors in corporate decision-making. They also agreed that multinational companies should be required to report revenues, profits and taxes paid for each country in which they operate.

The survey also highlighted that CEOs agree tax authorities around the world should freely share information about companies.

Speaking to CNBC on Tuesday, Dennis Nally, chairman of PwC International, said that international tax systems were "outdated" and that it was up to the governments to change their rules.

"The bottom line is, rules and regulations are still set by individual countries, and those countries all have their own goals and their own objectives," Nally said, adding that governments set rules with an eye to boosting jobs and investment in their own countries.

He added: "There's a real need for transparency and I think the more that companies can do to better describe how they are in compliance with the rules and regulations, that will go a long way to at least people beginning to understand the complexity of the issue that we are dealing with."

When asked whether PwC took advantage of arbitrage situations between different tax jurisdictions, Nally said that the issue was a complicated one.

"Our responsibility is to make sure our clients are in compliance with those rules and we have an important role to play in that regard," he said.

"When you talk about the reform of tax systems, you're going to have winners and losers, there's only so much that goes around and I think that that points to the complexity of the issue."

During 2013, the Organization for Economic Co-Operation and Development (OECD), a Paris-based think tank, has been campaigning vigorously for countries to get tougher on corporate tax reform. It believes aggressive tax strategies by many multinational companies have used corporate structures to shift profits to countries with lower taxes. This practice, the OECD warns, represents a grave risk to tax revenues, sovereignty and fairness.

In July, the OECD drew up a proposal for a fundamental rethink of these tax rules, which was backed by G-20 group of leading economies. This plan called the Action Plan on Base Erosion and Profit Shifting (BEPS) — identified 15 actions and will allow governments to collect the tax revenue they need and also gives businesses the certainty they need to invest and grow, according to the OECD.

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High-profile companies such as Google, Amazon and Apple, which have had their tax practices scrutinized, say they follow the law wherever they operate and pay what tax is due. Tim Cook, the CEO of Apple, testified at a hearing back in May by the U.S. Senate Permanent Subcommittee disputing assertions that the company avoids billions of dollars in U.S. taxes by shifting profits to foreign affiliates.

However, while the OECD has been busy urging nations to back the proposed reforms, the CEOs surveyed by PwC aren't convinced that the plan will ever see the light of day.

"Only a quarter of CEOs say current OECD attempts to reform the international tax system will be successful in the next few years," the report stated. "While 40 percent say efforts will not reach consensus."

Optimism surges

While downbeat on the possibility of tax reforms, CEOs showed a vastly improved outlook on the global economy, according to the survey.

This cheerful outlook was underlined with twice as many CEOs expecting the world's economy to improve in 2014 compared to last year, a rise to 44 percent from just 18 percent last year. Only 7 percent predicted the global economy would decline in 2014, it said, sharply down from 28 percent in 2013.

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"CEOs have begun to regain confidence. They've successfully guided their companies through recession and now more CEOs feel positive about their ability to increase their revenues and prospects for the global economy," Nally said in the press release on Tuesday.

CEOs in western Europe are the most confident about short-term global economic prospects, with a figure of 50 percent, but business leaders in central and eastern Europe show the lowest level of confidence with just 26 percent feeling optimistic.

In terms of revenue growth, 39 percent of CEOs say they are 'very confident' of their own company's prospects for the next 12 months. That's a rise from 36 percent last year and 18 percentage points higher than the low of 21 percent reached in 2009.

At an individual country level, confidence varies very widely, the report said. The highest levels of CEO confidence were found in Russia, where 53 percent of CEOs are very confident of revenue growth, followed by Mexico with 51 percent and South Korea with 50 percent. 36 percent of U.S. CEOs were bullish on their revenue growth, while Argentina languished at the bottom of the list with a reading of only 10 percent.

By's Matt Clinch. Follow him on Twitter