International corporate taxation is so complex that paying for expertise to navigate its churning waters can be a top-ticket item on the enterprise budget. So when tax experts unearth some additional enterprise liability, it raises everyone's blood pressure.
Case in point: KPMG LLC, the US-based tax and auditing firm, has released results of a May 2012 survey of 200 US-based enterprise tax professionals who say they're left out of the CFO's loop when it comes to cloud computing and expressed concern about the impact of cloud services on corporate finances.
(Cue a massive virtual cybergroan and collective headdesk.)
KPMG says 52 percent of respondents complained that top management isn't consulting them about cloud services, though they should. A full 41 percent said they are included occasionally in top management meetings about cloud services. Just 7 percent said they were regularly included in meetings.
"Clearly, many senior tax professionals are not being kept up to speed on their company's plans for the use of cloud technology," said Steven Fortier, KPMG's Cloud Enablement Program Tax Leader, in a prepared statement. "If the tax department isn't involved early on, an organization can end up creating substantial risk and missing out on important tax planning or incentive opportunities."
In a blog on Forbes, Joe McKendrick, an independent researcher, summarizes the chief concerns raised in the KPMG survey:
The tax gurus' main fear is that use the cloud [sic] means crossing over jurisdictions. Forty percent of the tax executives said companies need to identify how the use of cloud expands or contracts a taxable presence in the United States and foreign jurisdictions. In essence, using a cloud that originates from a server based in another country may be the same as moving work offshore.
KPMG says there's tremendous uncertainty about a range of issues related to cloud computing, including how use of clouds creates tax liability for intellectual property and whether or not cloud services have an impact on US federal R&D credits.
Most (59 percent) of the respondents to the KPMG survey said their companies use cloud services; another 24 percent weren't sure if they were using clouds. Nevertheless, 30 percent reported that they "lack confidence" in their organization's use of cloud computing and handling of the risk involved.
None of this is encouraging news. But there may be a silver lining: The fact that tax experts are examining cloud issues means that solutions and advice (albeit of the expensive kind) can't be far behind.
Sadly, I don't think tax laws will get simpler anytime soon. Instead, I think we can count on them to locally and internationally become revenue sources, brickbats, and points of contention over power.
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