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

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