Business Travel Advantage – Data with Insight 2019 Business Travel Advantage - Data with Insight

Business Travel Advantage – Data with insight 2019 Business Travel Advantage - Data with insight

What is the issue? have a short-term relocation or assignment By exercising control of Global business travelers potentially trigger policy, these typically don’t take account compliance and withholding obligations. of business travelers. This is despite the their business travel, These can be multiple (income tax, social business traveler population frequently corporates aggregate a security, immigration, corporation tax) and being many times larger than those on can impact at either or both the individual assignment as people have become mass of data with huge and the corporate level. Different tests increasingly specialized and moving skills inherent value to be apply to different taxes and places, but by putting them on a plane (rather than broadly all traveling employees making building capability in another country) is a tapped. more than just an occasional annual visit given component of many working lives. By increase these exposures. Historically this exercising control of their business travel, has often fallen below the radar of the corporates aggregate a mass of data with employer, the employee and the relevant huge inherent value to be tapped. tax and immigration authorities. Whilst most large groups with mobile workforces

02 Business Travel Advantage - Data with insight

Why is this a hot topic? the exposure, existing HR and payroll For others the prompt has been that the Since the global economic travails of 2008 systems are generally too “domestic” to tax authorities have challenged them, or and their impact on tax revenues across easily enable analysis where multiple Internal Audit have identified the issue and many jurisdictions, tax authorities have jurisdictions are involved. required that someone owns it. In one or faced pressure to reduce the “tax gap” – two cases a senior executive has had a the shortfall between what could be and For their part, tax authorities which had run in with either the tax or immigration what is actually collected. In seeking ways the legislative framework enabling them authorities and has demanded action. to address this, and in an environment to tax business travelers have displayed In time it is likely that external auditors compounded by falling tax receipts, little appetite for doing so, but this no will be considering whether an accrual the potential for the business traveler longer appears to be the case. Heightened is necessary for liabilities in relation to community as a source of revenues sensitivity to the issue of economic business travel, adding to those bringing is becoming apparent with the added migrants has led immigration authorities pressure on companies to take this attraction that these individuals typically to identify business travelers in breach seriously. In most cases the starting point don’t have a vote in the jurisdictions of visa and work permit requirements. has been to look back at historic travel seeking to tax them. Tax and social In consequence, companies with large by business travelers, and run analytics security can be collected without the sort business traveler populations have faced on that data to establish the scale of of political consequences which would penalties and individual travelers have any exposure. potentially follow a rate increase for found themselves refused entry or worse. domestic taxpayers, and the individuals For example, Malaysia applies six lashes and companies affected have little or no as the penalty for breaching immigration leverage to challenge the agenda. rules whilst one European jurisdiction has In a corporate context, gone as far as banning entire firms from whilst immigration More recently, pressures on the Schengen working in the country as punishment for Agreement in Europe have resulted in immigration violations. requirements have far more passport checks at borders always been taken which in turn has made it easier for Whilst the liability for income tax rests immigration authorities to distinguish with the individual business traveler, seriously, awareness of between occasional visitors and regular accountability for remitting the tax the tax and social security cross-border commuters. Immigration and may fall on the employer just as filing tax authorities are increasingly sharing responsibilities are often shared between exposures associated information both within countries and employer and employee. However, it is with business travelers between them, raising the likelihood that always the employer that is liable for social business travelers and their employers will security contributions. Furthermore, as has been somewhat find themselves in the spotlight. the tax treaty network – which relieves hazy, unquantified and business travelers of any income tax In a corporate context, whilst immigration liability between many jurisdictions – is crucially, unowned within requirements have always been taken much less extensive with respect to organizations. seriously, awareness of the tax and social social security, the sums involved can security exposures associated with be far larger. business travelers has been somewhat hazy, unquantified and, crucially, un- In the case of social security, in many owned within organizations. Often no jurisdictions these payments carry with one in the business has had unequivocal them entitlements. Employers who are responsibility for the area, and given the compliant can take doing the right thing for variety of data sources which may need their employees one step further by getting to be mastered in order to understand assistance with securing their employees’ whether there is a problem and if so how retirement and other benefits in countries large, it is not surprising that executives where they have accrued these rights. haven’t been rushing to take ownership. Building a business case for solving a We believe the minority of companies problem whose existence has yet to be who have taken action have done so for quantified would be difficult enough a variety of motives including a wish to with senior sponsorship. No one having understand their exposure so they can take responsibility has proved both a significant steps to minimize or mitigate it, to protect and sufficient deterrent to action. Even their reputation and for talent reasons where there has been an appetite to tackle to do the right thing by their employees.

03 Business Travel Advantage - Data with insight

How are the authorities approaching will be business travelers. usually assume the physical presence of the issue? For many immigration authorities, the an employer in the country concerned, The approach varies from one tax data is more immediately available but if neither the employer nor the authority to another. For example, the from passport swipes on entry and exit employee have a local presence it may State of New York has been targeting allowing them to quickly identify business not be possible to get withheld income financial services companies present travelers who have breached immigration tax or social security payments into the in multiple countries and requesting rules. These can be dealt with the next system and linked to the employee. If tax the expense reports and travel records time they attempt to cross the relevant authorities want wide-scale compliance for the highest paid employees. Having country’s border. by business travelers and their employers identified unpaid State Taxes in relation their systems will need to adapt. to business travelers, liabilities to tax, What are the external challenges to interest, and penalties are extrapolated being compliant? across the population resulting in Beyond the challenge presented by a significant demands on the employer. lack of ownership or awareness, and By contrast, the Canadian tax authority internal and third party systems which asks for details of a company’s business are not designed to address the business travelers when it seeks a refund of traveler challenge, the systems and rules withholding tax levied on intra-group applied by the tax authorities in individual payments, on the grounds that if a group countries also make it very difficult—if is international a sub-set of its employees not impossible —to comply. The rules

04 Business Travel Advantage - Data with insight

Business travel and data analytics an employee’s whereabouts—the travel As tax and immigration authorities have system says they returned home on one begun targeting resources in this area, date, yet they have an expense claim for helping organizations manage their a hotel in another country on the same business travel compliance has become a day. Validation and explanation of this type key area of focus for professional services of inconsistency is typically the only time firms. Deloitte has developed a range of that employee involvement in the process services, collectively known as “Business is potentially required, and is a far lighter Travel Advantage” to help businesses touch than traditional systems which rely address compliance and risk both on regular travel diary entries by already reactively and proactively. busy business travelers.

At Deloitte, Business Travel Advantage Validated data must then be subject to (BTA) has grown from being a resource analysis using domestic country rules, to identify and address tax compliance international treaty networks, and the obligations into an end-to-end, managed client’s business rules. At this stage service employing data analytics to support Deloitte’s BTA offerings produce visualized a range of services relevant to the growing outputs covering income tax, US state business traveler community, underpinned taxes, social security, immigration and by a robust engine incorporating subject permanent establishment (PE) risk factors. matter knowledge across individual These visualizations allow the user to income, corporate and indirect taxes, social understand, in a way hitherto not widely security and immigration. BTA can support available, the areas of immediate exposure mobility and business transformation by so that informed, fact-based decisions enabling data-driven decision-making. can be made as to what should be prioritized and addressed. The exposure One of the major challenges is how to to income tax and social security liabilities, harvest the right data. It is likely to be withholding and reporting obligations gathered from two or more disparate at both the corporate and individual sources including HR information systems, employee levels are indicated. the travel system or the expenses system, and potentially from other records such Becoming compliant is just a first step. as badge scans at company sites and VPN Once the data has been marshaled, log-ins. This then needs to be mapped executives and their advisers like Deloitte and the inevitable imperfections managed are recognizing that there is more that they so that anomalies can be identified. For can do with it. example, conflicting information about

05 Business Travel Advantage - Data with insight

What opportunities beyond compliance implement a robust process to identify does business travel analytics bring? where they have established a corporate One of the reasons that companies haven’t PE for tax purposes. The outputs of BTA- focused on business travel compliance in type tools can be used to identify those the past is because it cuts across multiple countries in which the company has a PE functions (tax, legal, finance, operations, risk so that this can be proactively managed procurement, HR, payroll and internal audit) and consideration given to who goes where so it hasn’t been the obvious responsibility and when before trips are undertaken. of one department. However, once a Similarly an individual business traveler can company decides (or is forced) to tackle the be provided with instructions on activities tax and immigration issues of its business that can and cannot be conducted whilst traveler population, this very multiplicity of traveling. stakeholders offer a wide range of potential usage for the data. In relation to VAT, data mined from the travel and expenses systems can help VAT From a corporate perspective the two specialists identify the potential for VAT most immediately interesting areas are PE refund claims. Given the volumes of business and VAT and the attention paid to these travel in some organizations, this has the by tax authorities will inevitably increase potential for being a significant tax cash as companies start to submit Country- inflow. by-Country Reporting under the OECD’s Base Erosion and Profit Shifting (BEPS) initiative. BEPS increases pressure on global organizations to demonstrate and

06 Business Travel Advantage - Data with insight

What opportunities beyond badly eroded if the staff mix is such that contribution to cost and opportunity compliance does business travel additional costs are incurred as a result of management. analytics bring? (cont'd...) individual’s business travel profiles. In this From a cost control and governance case BTA was used both to understand No doubt the future holds even greater perspective BTA activities help identify the actual cost of using particular team challenges as tax authorities will potentially instances where corporate travel and members, to identify the optimal mix and move on to the ‘virtual business traveler’ accommodation policies are not being to track that travel is occurring according to —the people using technology to work adhered to, or areas in which a policy plan so that budgets are achieved. remotely, earning money in one jurisdiction needs to be amended or introduced. while sitting in another. Different sources This third case references the use of pre- of data may be required to identify and For organizations with high volumes of travel functionality, which enables travel quantify the exposures of “stationary” business travel, being able to aggregate scenario planning from the perspective business travelers, but if this potential expenditure by vendor offers a cost of “If I make these trips, do I have a tax threat becomes a reality, BTA solutions will control angle that has the scope to make a problem or need a visa?” and “In staffing be able cope. worthwhile contribution over time, helping this project is it better to use person A procurement to negotiate with airlines or person B?” Similarly for immigration and hotel groups that enjoy the greatest purposes it can help identify whether a As more companies are company spend. traveler is in compliance before departure or whether they shouldn’t make the trip. using analytics, valuable Business traveler data can also be used Both employer and employee need to take applications have to assess the accuracy of budgets and responsibility in this area. Although the forecasting with the benefit of hindsight obligation to be compliant resides at an emerged which were only and improve them in future, or to identify individual level, employers can also face identified once a widening countries where results may not merit heavy penalties if they are not mindful of a the level of investment in inbound country’s regulations. net of stakeholders could business travel. see the outputs available Particular industries may also have their As more companies are using analytics, own specific and granular tracking needs and were able to ask valuable applications have emerged which —for example, highlighting the need for themselves 'Can I use this were only identified once a widening net local financial services authorization for of stakeholders could see the outputs particular travelers to certain countries. data to help me .....?' available and were able to ask themselves “Can I use this data to help me ….. ?” One of the lessons from these examples is that companies building a business case For example, understanding the travel for investing in business travel analytics patterns of revenue generators has allowed should involve as wide a stakeholder base the tax function of one US group to better as possible to tease out such multiple identify the jurisdictions in which its sales benefits. Even if implementation is modular are being made. This correct sourcing of with BTA components added over time, income in the corporate tax return is it is helpful to see the full potential from being used to support claiming of the start. foreign tax credits.

Another company has been able to analyze What does the future hold? the exact number of trips made by its With data increasingly available and the employees to areas affected by the Zika authorities getting ever more serious virus to negotiate better rates of medical about policing the tax, social security emergency insurance covering their and immigration compliance of business business travelers. travelers and their employers, business traveler compliance should be on the A third company which undertakes agenda of every multinational. The good project-based work around the globe is news is that modern analytics capabilities using BTA to help price its projects, having mean it need not be just a compliance found in the past that its margins can be exercise but can make a positive

07 Business Travel Advantage - Data with insight Contacts

To understand more about how Deloitte's Business Travel Advantage service can make a strategic impact on your organization as a powerful tool for workforce management, cost control, budgeting, and long term resource planning, please contact:

Americas EMEA Asia Pacific

Lorraine Cohen Robin Brown Russell Bird Deloitte US Deloitte UK Deloitte Japan Partner, Global Employer Services Associate Director, Global Employer Services Partner, Global Employer Services San Francisco London Tokyo [email protected] [email protected] [email protected] +1 415 783 6329 +44 20 7007 6690 +813 62133979

John Jennings Manon de Boer Tony Jasper Deloitte US Deloitte Netherlands Deloitte China Partner, Global Employer Services Partner, Global Employer Services Partner, Global Employer Services Chicago Netherlands Hong Kong [email protected] [email protected] [email protected] +1 312 486 4306 +318 82881 848 +852 22387499

Fatima Laher James Macpherson Joe Logudic Deloitte Canada Deloitte UK Deloitte China Partner, Global Employer Services Partner, Global Employer Services Partner, Global Employer Services Toronto London Hong Kong [email protected] [email protected] [email protected] +1 416 601 6570 +44 20 7007 8686 +852 22387899

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