Survey: Med device finance execs scramble to prepare for excise tax
The firm reported, in an April 18 report, that nearly 61 percent of 190 respondents believe the forthcoming tax will take a bite out of their bottom line, while 60 percent expect to have to spend more than before on compliance costs.
A little more than half, 55 percent, foresee compliance trouble in the form of uncertainty over which products will be taxable (16 percent) and challenges in implementing compliance systems (16 percent).
Respondents also cited likely compliance hurdles, including determining the tax base for each taxable device (15 percent), developing an implementation plan and determining the necessary resources required (13 percent).
Half of survey respondents said they are unsure what actions their respective companies might take, while 30 percent are idling because they are either still trying to understand the implications or evaluate their options.
“Manufacturers and importers of medical devices have a great deal of work to do in order to prepare to begin reporting the tax,” warned Frank Mattei, U.S. tax leader of KPMG’s pharmaceutical and medical device practice, in prepared remarks. “Companies will need to become familiar with the excise tax rules, identify their affected entities and products, and develop the appropriate compliance processes. A ‘gap’ analysis should be conducted as soon as possible to identify areas that need to be addressed.”
“Companies need to work across various functions to prepare for effective compliance, because this is not just a tax issue,” added Adam Uttley, a KPMG tax specialist. “Finance and tax departments will need to work with their IT, operations and regulatory counterparts, while keeping leadership informed of issues that could affect the business."
The survey follows amplified calls issued by industry groups and congressional Republicans in February, when the IRS issued a guidance to help industry implement the new excise tax.
Said Uttley: “Although many may still be hoping for legislative relief, it would be prudent to assume that a first deposit of medical device excise tax will be due by Jan. 29, 2013, and the first quarterly federal excise tax return will be due by April 30, 2013.”