Tax Risk Management and Board Responsibility - International Tax ...

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Compliance Compliance can only be assured if tax issues are identified and dealt with in a timely way. This will only be achieved by awareness of tax issues throughout the business. A close link between the compliance process and other tax functions (e.g. planning) is important. One of the department’s goals will be to manage compliance efficiently to ensure that tax processes are cost effective and also that no overpayment of taxes takes place 36 . Accounting The accounting system is the basis for sufficient and accurate information for the tax department. Accounting principles need to be understood by the tax department, just as the accounting department should be competent to identify potential tax issues 37 . Planning The planning process should ensure that the tax department gets involved at the strategic level at an early stage of projects. Tax planning can only be effective if there is access to management information and decision makers of the business. Procedures need to be aligned with risk policies. Furthermore it is essential to establish processes to monitor the implementation and post-implementation stages 38 . Coverage Tax issues need to be on the agenda of the board. The tax department has to cover all taxes adequately. If there is no operational control over certain taxes the tax department should at least be able to exercise oversight and ensure that any necessary action is taken by the appropriate party or engage specialist help as necessary. Any taxes not dealt with within the tax department need to be clearly designated as the responsibility of another department, i.e. wage tax dealt in the HR-department. 36 KPMG Tax in the Boardroom, A Discussion Paper, 2004, Appendix III 37 KPMG Tax in the Boardroom, A Discussion Paper, 2004, Appendix III 38 KPMG Tax in the Boardroom, A Discussion Paper, 2004, Appendix III Page 16 / 25
Processes to raise awareness of tax issues throughout the business should be implemented 39 . V. Board responsibility 1 International focus on board responsibility for tax risk management The OECD has stressed the importance of board involvement in tax strategies of multinational companies: “Encouraging management and audit committees of large enterprises (e.g. CEOs and boards of directors) to take greater interest in, and responsibility for, their tax strategies” 40 . There is a clear expectation that the OECD will extend its guidelines on corporate tax governance in the near future. The main responsibility for determining the global business strategy on tax and ensuring that the system of internal controls is effective in facilitating the application of this strategy is seen to rest with the board. International reporting requirements have been extended with the introduction of SOX 404 and corporate governance guidelines in various countries. The standard FIN 48 under US GAAP intensifies the focus on accounting and disclosures for uncertainty in income taxes. The extension of reporting obligations is accompanied by an increasing interest by stakeholders in risks resulting from tax issues. So, to summarize, there are two very important challenges for the board. One is to ensure the creation of an internal corporate environment that is handling all tax matters appropriately and in line with the tax strategy. The second is adequate external communication addressing the requirements of international reporting standards as well as the information needs of external stakeholders. 39 KPMG Tax in the Boardroom, A Discussion Paper, 2004, Appendix III 40 OECD Final Seoul Declaration, September 2006 Page 17 / 25
Page 1 and 2: Tax Risk Management and Board Respo
Page 3 and 4: I. Introduction Is the board respon
Page 5 and 6: II. The changing Landscape - Why ha
Page 7 and 8: usiness transactions such as merger
Page 9 and 10: III. Tax is in the boardroom - What
Page 11 and 12: extraordinary pressure from investo
Page 13 and 14: made on how aggressive tax manageme
Page 15: department needs to be in line with
Page 19 and 20: Direction The tax philosophy has to
Page 21 and 22: Control It is the responsibility of
Page 23 and 24: VI. Future developments Stakeholder
Page 25: VII. Conclusion The board is respon

Tax Risk Management and Board Responsibility - International Tax ...

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