The results of Global CEO Outlook 2017 | KPMG | RU

CEOs around the world expect an increase in tax rates in the next three years

The results of Global CEO Outlook 2017

KPMG interviewed over a thousand business leaders from corporations in Europe, America and Asia to know their opinion about key economic issues. The Global CEO Outlook 2017 includes leader’s opinions from 11 industries – from automotive industry to retail and pharmacy.

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Taxes are expected to rise

Almost 80% of the CEOs from France and Great Britain and 76% of their colleagues from China expect the tax rates to rise in their countries in the next three years. In general, 67% of top managers around the world share their apprehension. “Different countries are approaching tax reform in different ways,” notes Jane McCormick, KPMG’s Global Head of Tax notes. “But from a global perspective, pressures on national budgets and the political difficulty of increasing taxes on individuals are likely to lead to increases in the taxes borne by business.”

Mikhail Orlov, Partner and Head of Tax and Legal, KPMG in Russia and the CIS, says,

“No increased tax burden is expected in Russia. The President and the Government have announced on several occasions that they do not plan to increase main tax rates for natural persons or legal entities, or introduce new taxes in the near future. The total amount of tax withholdings will remain at the level of 31.5% of GDP for the next three years. Additional revenue from taxes should be provided through a more efficient tax administration. In the competition for mobile resources (personnel and capital) the Government considers several scenarios of redistribution of tax burden in Russia. In particular, they consider the possibility to lower the corporate income tax and the payroll fund while increasing the consumption taxes through higher indirect tax rates (VAT and excise taxes).

At the same time, there is a risk that further increase of the fiscal burden will be achieved by introducing non-tax mandatory payments. Although such non-tax payments are quite similar to taxes in their nature, they are not a part of the tax system and ignored for the purposes of tax calculation. In particular, the State Duma discusses the introduction of a resort fee presented as a non-tax payment, although its attributes are close to fiscal charges indicated in the IRC.”

Over half of respondents believe that geopolitical changes have a direct influence on their businesses and this influence has been growing in recent years. The structure and management of foreign assets depend mainly on Brexit conditions. Over half of CEOs strengthen their teams by engaging specialists from relevant industries (69%) to understand and manage potential risks in different scenarios. Seven out of ten top managers said they started investing more in the last year into the improvement of quality control and risk management systems.

Business sees new risks

Operational risks are of top priority for the management in the time of growing uncertainty. It is interesting that this year many respondents have mentioned reputational risks and brand-associated risks as issues requiring special attention of the top management. Moreover, the reputation and the brand were named as the second most important aspect influencing the business growth in the next three years. This concern is mainly due to the fact that the businesses tend to hire specialists for contract work and they have no time to get used to the corporate culture as compared to their in-house peers and sometimes fail to comply with the corporate values of their temporary employer. In the context of an increasingly transparent information environment and unprecedented speed of information dissemination, such situations become a virus-like.

Cyber threats, leaders of the last year, this year dropped to the 5th place: respondents believe they have gained understanding and improved their management skills – 42% of leaders feel they are duly prepared for any cyber incident. At the same time, the management understands that all risks, including operational, technological, reputational, etc., have their cyber component and leave the issue on the agenda.

It is particularly interesting that the number of business leaders who believe in the transformation of their business through technologies dropped by half this year to 26% as compared to 41% in 2016. This does not mean that CEOs do not believe in innovations, but their understanding of the role of innovations has changed: it is not about the need to change everything that there is, but about readiness to new challenges and opportunities. Besides, respondents say that breakthrough technologies do not have to transform an entire industry, even if they influence some particular function only, the effect will be significant. Top management are quite sure that they will be capable of controlling the changes anticipated in their industries, even if the players will emerge who they do not see as their competitors today.

World economy will grow

The survey shows that in general the top management around the world is positive towards the prospects of global economy although the optimistic attitude has dropped as compared to the previous year (65% in 2017 against 80% in 2016). The only country demonstrating growing confidence among business leaders in the economic growth in the last year is the USA. Japan, on the contrary, became the least positively thinking country – 21% against 93% in 2016 evidencing rapid changes taking place in the business environment of the country.

The full version of The Global CEO Outlook is available here

2017 Global CEO Outlook country reports are available here.

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