Tax Annual Report 2017: Worth The Trouble?

Author:Iberian Lawyer
Profession:Iberian Lawyer

Tax authorities could be pushing the boundaries of legality as they seek to increase the revenue they collect, say lawyers - meanwhile, the risk of being held liable for facilitating tax evasion could mean some law firms consider scrapping their tax practices

Given that the Spanish and Portuguese governments are looking to raise more money for the public purse, the respective nations' tax authorities are being set even higher targets in terms of the amount of cash they need to collect. Consequently, lawyers claim, corporate taxpayers are being increasingly squeezed by the taxman, to the extent that, in the view of some, they may even be going beyond what is legally permitted. As a result, tax demands are increasingly being disputed with the result that litigation is on the rise. While this means more instructions related to contentious matters, there are other forces at work that mean there is also considerable cause for concern among tax lawyers. There is a fear that the tax advice provided by law firms to their clients could potentially be viewed, in some quarters, as facilitating tax evasion. If the relevant authorities were to take a dim view of such practices, there is the chance that law firms could be held liable, with the result that they could suffer severe financial and reputational damage. In this context, some lawyers suggest that law firms could cease investing in their tax departments because of the potential liabilities or even go as far as to scrap them altogether. More aggressive The Spanish tax authorities are adopting an increasingly aggressive position, particularly in relation to their efforts to tax businesses on profits obtained abroad, says Juan Alberto Urrengoechea, partner at Roca Junyent. He adds that transfer pricing issues and an increase in tax litigation are also generating an increase in work for lawyers. Meanwhile, providing tax-related advice on cross-border deals is becoming increasingly challenging for lawyers, according to Latham & Watkins partner Jordi Domínguez, as it is difficult to make an assessment on the "practical implications of BEPS [base erosion and profit sharing] and the extent of the changes that will derive from the implementation of the multilateral instrument to modify bilateral tax treaties". The fact that some countries are taking measures to attract investment by reducing tax rates is creating opportunities for lawyers, according to Javier Gónzalez Carcedo, partner at PwC Tax and Legal Services, who adds that tax transparency - in relation to the Organisation for Economic Co-operation and Development's BEPS initiative - is also providing considerable work for law firms. The fact that it is difficult to predict the outcome of inspections carried out by the tax authorities is a significant challenge for lawyers when advising clients, according to Ashurst partner Eduardo Gracia. He adds that the authorities are becoming more aggressive because the "goals they are set are more difficult to achieve in terms of collections"...

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