Strategizing International Tax Best Practices – by Keith Brockman

Archive for May, 2013

Post-Audit Strategies: Best Practices

This post is a complement to my 5 April Pre-Audit Strategies blog.  Pre-audit strategies are addressed, the audit is conducted, ultimate settlement is achieved and workpapers are returned to the files.  Post-audit tax strategies can be utilized to address learnings for future audits, critique the pre-audit strategy approach, and form Best Practices to minimize global risks.

The following ideas should be beneficial in a post-audit tax strategy review:

  •  List all items in the pre-audit strategy checklist, using my prior blog as a reference along with your ideas.  Based on hindsight, provide a rating of 1 to 5 for each strategy with comments.
  • Revise the global checklist, if applicable, for future audits.
  • Cross-reference the pre-audit checklist against the top risks encountered / not initially settled in the audit for correlation.  Are there items that should have been performed before commencement of the audit that were not foreseen at the time?
  • Review utilization of tax counsel in the audit to address significant risks; were they involved, should they have been involved earlier, was counsel appropriate for the risks being contested, what learnings can be gained?
  • Were audit meetings negotiated efficiently using the appropriate individuals?  Should there have been additional training to address significant tax risks, educate the auditor in the company’s transfer pricing methodology, etc.?
  • Should a company overview have been provided, if applicable, to provide context for the auditor prior to requests for data?
  • Conduct a 360 feedback with everyone involved in the audit to gain efficiencies in the ways of working.
  • Were there basic misunderstandings between the auditor and the company that could have been addressed differently?
  • Assess the consistency of audit responses with other audits being conducted globally; are they globally consistent to form a uniform basis for discussions between tax authorities sharing information?
  • Are there new risks identified that should be included in the global Tax Risk Framework?
  • Were audit defense mechanisms reviewed timely to plan effectively?
  • For US multinational companies, were memorandums prepared for foreign audits to obtain additional assurance for receiving the benefit of a Foreign Tax Credit?  Foreign counsel should be proactive in this effort from the beginning of the audit, outlining cost/benefit relationships, practical appeal opportunities, probability of success for alternative appeals, etc.  This memorandum should be discussed early in the audit to align expectations.
  • Review precedents established for future years, and applicability for post-audit years.
  • Review tax reserves established for the audit years, and all open years.
  • Provide a brief memoranda to the audit participants and senior management, summarizing the audit and successful interaction of internal and external resources.
  • Were Double Tax Treaty, bilateral and/ or multilateral defenses used?  Review their effectiveness, or choice not to use.
  • Review the interaction of internal and external resources; who was in control of the strategy?
  • In today’s environment of increased collaboration between the tax authorities and multinational companies, should an enhanced collaborative tax return / audit strategy be considered to provide timely certainty?
  • Develop a post-audit tax checklist as a learning tool for individuals engaged in tax audits.

The above points should form a foundation to engage in this beneficial exercise, highlighting learnings and opportunities, while adopting a Best Practices approach.

I look forward to your valuable comments.

The Tax Foundation: an informative resource

http://taxfoundation.org

The Tax Foundation is a nonpartisan research organization that monitors U.S. fiscal policy.  “The Tax Foundation’s Center for Federal Tax Policy produces and promotes timely and high-quality data, research, and analysis on federal tax issues that influences the debate toward economically principled policies.”  There are interesting articles and publications available at their website.

In a report dated 21 May, 2013 entitled “Are Multinational Companies Dodging Their Taxes?” the Foundation found that U.S. multinational corporations paid more than $100 billion – an average effective rate of 25 percent – in foreign income taxes in 2009.  This information is especially relevant as the issue of international tax payments was addressed on Capitol Hill when Apple executives testified before a Senate subcommittee.

A paragraph at the bottom of the article focuses on the complexity of international taxation for U.S. multinational corporations that is often overlooked in today’s tax environment, stating that “People who criticize U.S. companies for ‘avoiding’ taxes on their foreign earnings need to be more careful with their language and acknowledge that our worldwide tax system requires U.S. firms to pay taxes twice on their foreign profits, before they can reinvest those profits back home.”

Another Tax Foundation publication entitled “U.S. Multinationals Paid More Than $100 Billion in Foreign Income Taxes” is also interesting, as it includes a table that lists 2009 country data in order of Taxable income, Foreign taxes paid/accrued/deemed paid, and Average Effective Tax Rate.  For example, the average effective tax rate is 62.7% for Nigeria, approx. 45% for Indonesia and Italy, while the effective tax rates for Norway and South Korea exceed 60%.

This resource is useful for U.S. multinational corporations, and other multinationals, as an information resource in today’s complex tax environment.

The statement that people need to be more careful with their language can also be correlated to the observation that terms used interchangeably by tax authorities and governments include: tax planning, aggressive tax planning, tax avoidance, evasion and fraud.  The absence of publicly stating important differences of such terms may lead to misleading statements and inappropriate conclusions.

I would encourage everyone to be familiar with this valuable resource.

http://www.wired.co.uk/news/archive/2013-05/22/eric-schmidt-tax

OECD: (Revised) Safe Harbours, Chapter IV, Transfer Pricing Guidelines

Click to access Revised-Section-E-Safe-Harbours-TP-Guidelines.pdf

The OECD approved this revision on 16 May 2013 and discusses the benefits and concerns for safe harbour provisions.  It encourages appropriate bilateral or multilateral safe harbors for which the previous guidance was generally silent.  In an effort to facilitate negotiations between tax administrations, sample memoranda of understanding (MOUs)” are included for competent authorities to establish bilateral safe harbors for certain classes of transfer pricing cases.  Sample MOUs are provided for low risk activities of Manufacturing, Distribution, and Research and Development Services.

Benefits to be gained:

  • Compliance relief
  • Certainty
  • Administrative simplicity

Safe harbour concerns:

  • Divergence from the arm’s length principle
  • Risk of double taxation, double non-taxation, and mutual agreement concerns
  • Possibility of opening avenues for tax planning opportunities
  • Equity and uniformity issues

Sections 4.128 and 4.129 emphasize the fact that safe harbours can be negotiated on a bilateral or multilateral basis, providing significant relief from compliance burdens and administrative complexity.  Additionally, a safe harbour is not binding, or precedential, for countries which have not themselves adopted the safe harbour.

In an environment of increasing request for assistance from competent authorities, I am hopeful this tool is used proactively and efficiently by competent authorities to provide certainty for past, current, and future low risk activities.  Multinationals should be familiar with these new guidelines and the respective MOUs to aid negotiation efforts in bilateral or multilateral transactions.  Discussion of this principle in meetings with competent authorities will hopefully lead to enhanced mutuality, cooperation and resolution.

8th meeting of Forum on Tax Administration 16-17 May 2013: Cooperative Framework

http://www.oecd.org/site/ctpfta/

The Forum on Tax Administration (FTA) was created in July 2002 by the OECD with the aim of promoting dialogue between tax administrations and of identifying good tax administration practices.  The OECD link provides reference to the opening FTA remarks by Deputy Secretary-General Mr. Yves Leterme, and the Final Communique from the 16-17 May 2013 meeting in Moscow, Russian Federation.

The press release sets the stage with the following remarks:

  • Tax base of governments is being threatened by international tax avoidance and evasion.
  • Part of the answer to international avoidance by businesses is a question of tax policy, rather than administration.
  • The development of a new set of international standards is going to require ever closer cooperation at the international level.
  • International cooperation between tax administrations is enhanced by improved transparency, which helps tax administrations apply the rules effectively.
  • Transparency is also key to the fight against international evasion.
  • The OECD, working with the G20, is developing a new multilateral standard on automatic exchange of information.

The Final Communique’s first paragraph states the need to effectively address tax evasion, aggressive tax avoidance, trans-national tax fraud and aggressive tax planning.  The Communique addresses the need for increased transparency and comprehensive exchange of information, and strongly endorses exchanging information automatically.

Most importantly, the Communique further states: “We have developed a framework of co-operative compliance for the large business segment that provides a sustainable basis for a relationship based on transparency, justified trust and confidence between tax administrations and business.  We will continue to refine this framework, also working with the business community, and recommend all countries to adopt it.”

In today’s tax environment, against the backdrop of terminology including tax evasion, aggressive tax avoidance, tax fraud and aggressive tax planning, the recent and upcoming meetings of the OECD and related organizations are increasingly important.  The trend of a formal cooperative compliance framework is becoming more evident, and multinationals should already be planning for ways to develop such relationships with tax authorities around the world in present and future audits.

Related articles

Google UK: PE Risk – Do no evil

http://www.reuters.com/article/2013/05/16/us-google-britain-tax-idUSBRE94E0WL20130516

In continuing verbal encounters by Google UK before the Parliament’s Public Accounts Committee (PAC), it is interesting to note the following in the above article, supplemented by similar language in the related articles cited below:

  • The company evidently stated that “We are selling, but not closing.”
  • The article cites the fact that a review of LinkedIn profiles revealed sales activities were conducted by employees.
  • The article does not provide the reader a concise description of PE, or its safe harbors in Double Tax Treaties: re: “preparatory and auxiliary activities.”

This arduous lesson in reputational risk reinforces the need to ensure Best Practices are in place for PE, as posted in a prior blog.

It is a very interesting point that LinkedIn profiles were reviewed to further examine potential sales activities carried out in the UK.  A company cannot control the social network profiles of its employees, although it should be very clear in everyone’s job description what is, and is not, allowable for marketing or sales activities.  The Do’s and Don’ts List should be signed annually as a reminder to employees of their responsibilities and limitations in scope.

A company with significant Branch activities should be reviewing how written statements, including emails, are communicated in  discussions of sales, market support or promotional activities.

The statement “We are selling, but not closing” brings a substance vs. form argument into the subjective definition of PE, an argument that is not helpful in forming objective arguments by the company or tax authorities.  Therefore, a company should examine its Best Practices to increase its objective PE evidence, in substance and form, in preparation for controversy.

Does your Tax Risk Policy include any statements re: whistleblower activity, and how such activity should be addressed?

Finally, a company should conduct an annual audit of its significant Branch activities, in possible coordination with internal audit, to further minimize its PE (and reputational) risk on an annual basis.

Tax Risks & Your Tax Organization: Best Practice Alignment

A proliferation of complex and significant tax risks are at the forefront of global news.  Aggressive tax planning, tax avoidance, tax evasion and fraud are terms used interchangeably to describe actions by multinationals.  Tax authorities, governments, G8, G20, among others, are discussing new ways to combat these perceived risks in the form of additional tax transparency, audit resources, new legislation, etc.  Similarly, tax organization structures should also be reviewed based on a tax risk management approach.  Ideas for developing Best Practices in tax risk management include the following:

  • List the top 5 tax risks; then align these risks with the tax personnel whose primary function it is to focus on such risks.
  • Are the top 5 risks being managed efficiently internally and / or externally?
  • Is each risk the top priority of one or more members of the tax team?
  • Is the strength of each tax member aligned with the respective risk?
  • Are you currently able to shift resources away from geographical / functional responsibilities to address current risks?
  • Are the tax members adding focus on these risks in addition to their other responsibilities?
  • Have specific strategies been developed to address the top tax risks, and champions assignable for each risk?
  • Are specific training courses being developed to better inform the tax team and the business of developing risks?
  • Are proactive discussions being held with senior management and the Board to ensure efficient tax risk management?
  • Is there a quarterly tax risk review to assess status and future actions?
  • Have internal procedures been reviewed, as well as mitigating controls, to address potential risk gaps?
  • Is the business aware of such risks on an ongoing basis?
  • Is this an opportunity to review tax resources to achieve the proper focus on the top tax risks?
  • Compare the current tax organizational structure with the tax risks; is it fit for purpose?
  • Review Best Practices for obtaining APA’s, entering mutual audit procedures such as CAP, horizontal monitoring, enhanced cooperation in today’s increased emphasis on mutuality and and tax transparency with tax authorities.
  • Who conducts audit meetings with tax authorities around the world?  Is this an opportunity to minimize risks at an early stage?  Are these individuals knowledgeable of the top tax risks?  Do you conduct training for audit meetings, including negotiation skills?
  • Is internal audit aligned to identify tax risk gaps in their routine audit reviews?
  • Is Global Mobility trained to identify potential PE risks?  Consider a review of their internal processes for assignments.
  • Who reviews Branch activities to ensure such activities do not inadvertently lead to a PE?
  • Review the Transfer Pricing documentation framework to address transfer pricing issues early.
  • Ensure Treasury is aligned with the tax risks and processes are in place for intercompany loan arrangements.
  • Align cross-functionally to ensure new strategies, or a change in current strategies, are reviewed for tax risk exposure.

In summary, I would encourage a review of the tax organization structure based upon a creative tax risk approach, as compared to the present organization to highlight opportunities and Best Practices.

A European Taxpayers’ Code

http://ec.europa.eu/taxation_customs/common/consultations/tax/2013_tpcode_en.htm

The Commission adopted on 27th June 2012 a Communication on the fight against tax fraud and tax evasion. An Action Plan which details concrete proposals to strengthen the fight against tax fraud and tax evasion was adopted on 6th December 2012.

One of the 34 measures contained in the Action Plan is the development of a European Taxpayer’s Code which is described as follows (action 17):

In order to improve tax compliance, the Commission will compile good administrative practices in Member States to develop a taxpayer’s code setting out best practices for enhancing cooperation, trust and confidence between tax administrations and taxpayers, for ensuring greater transparency on the rights and obligations of taxpayers and encouraging a service-oriented approach.

The Commission will launch a public consultation on this at the beginning of 2013. By improving relations between taxpayers and tax administrations, enhancing transparency of tax rules, reducing the risk of mistakes with potentially severe consequences for taxpayers and encouraging tax compliance, encouraging Member States’ administrations to apply a taxpayer’s code will help to contribute to more effective tax collection.

In anticipation of this initiative, some points worthy of consideration are:

  • Does your company have a Taxpayers’ Code or Best Practices within a Tax Policy or Tax Risk Policy?
  • Should the concept of a Taxpayers’ Code be discussed at the beginning of an audit to enhance trust and confidence?
  • Will this initiative be helpful in a simultaneous or joint audit?
  • Should a discussion be initiated with the auditor to establish a mutual Taxpayers’ Code?

I look forward to your thoughts on this interesting topic.

Africa Progress Report 2013: Global Tax & Transparency initiatives

http://www.africaprogresspanel.org/en/publications/africa-progress-report-2013/apr-documents

The Press Release and Progress Report 2013 are not restricted to activities within Africa, as they advocate tax and transparency initiatives for the upcoming G8 Summit and the international community.  Japan, Russia, Switzerland, the UK and the US are individually identified in the report.

The Africa Progress Panel (APP) consists of ten distinguished individuals from the public and private sector who advocate for shared responsibility between African leaders and their international partners to promote equitable and sustainable development for Africa.  Mr. Kofi Annan chairs the APP. The Panel functions in a unique policy space with the ability to target decision-making audiences.

The press release sets the stage for the debate with the following statement: “International tax avoidance and evasion, corruption, and weak governance represent major challenges.  The report therefore welcomes the commitment from the current G8 presidency, the UK, and other governments to put tax and transparency at the heart of this year’s dialogue.  International business should follow best practices on transparency.”

Part III of the Report has sub-captions beginning on page 63 entitled: “Aggressive tax planning” drains the public purse, followed on the subsequent page with “When companies evade tax responsibilities.”  This section includes the following statements: “Tax avoidance has emerged as a global concern.  In Europe and North America, public anger has been directed towards highly visible multi-billion dollar firms that minimize their tax liabilities through sophisticated but aggressive tax planning.”

Part IV, “Fair taxation-an international challenge, ” provides the commentaries: “Many resource-rich countries in Africa are losing out as a result of “aggressive tax planning”-a euphemism in some cases for tax evasion.  Transfer pricing is another endemic concern.  Tax evasion is a global problem that requires multilateral solutions.  At the heart of the problem is the unwillingness of the OECD countries and wider international community to strengthen disclosure standards.  Japan, Russia, Switzerland, the UK and the US all operate regimes that allow for aggressive tax planning and limited regulatory oversight.  All tax jurisdictions should be required to declare the beneficial ownership structure of registered companies.  Governments in Africa could also look beyond the OECD dialogue.”

The sub-section entitled “Recommendations for Immediate Action” includes a message for transparency by extractive companies stating: “All countries should embrace the project-by-project disclosure standards embodied in the US Dodd-Frank Act and comparable EU legislation, applying them to all extractive industry companies listed on their stock exchanges.”

A message to the G8 community states: “The G8 should establish the architecture for a multilateral regime that tackles unethical tax avoidance and closes down tax evasion.  Companies registered in G8 countries should be required to publish a full list of their subsidiaries and information on global revenues, profits and taxes paid across different jurisdictions.  Tax authorities, including tax authorities in Africa, should exchange information more readily.”

The message to the international community states: “The G8 should adopt at its 2013 summit in the UK a framework that commits each country to full disclosure through a national public registry of the beneficial ownership of registered companies, with a commitment to create such registries before the 2014 G8 summit.”

This report demonstrates the tone for increased tax and transparency within Africa, and more importantly its message to the G8 and the international community.  Unfortunately, the terms aggressive tax planning, avoidance and evasion are used interchangeably in the Report which is intended to provide a strong message for tax and transparency changes but also provide complexity in seeking solutions.  This message is being seen more often in the news from around the world, and the transparency topic is one that should be discussed with senior management and the Board to ensure alignment going forward.

Articles

Branch activity tax risk: Google UK controversy

http://news.yahoo.com/uk-lawmakers-set-date-google-ernst-young-tax-155316417.html

As this news has been widely reported, this controversy highlights the need to aggressively govern the activities of significant Branches worldwide.  This issue is a reminder in today’s tax environment of the necessity for diligence and governance for Branch operations.  The following ideas are presented for review and comment.

  • Review all material on your company’s website re: location of sales activity, associates and job postings.
  • Review job titles and descriptions for all personnel in Branches worldwide.
  • Compare Branch accounts and related disclosures with actual activities on an ongoing basis for consistency.
  • Have a Do’s and Don’ts list that is reviewed annually with individuals having market support activities.
  • Align with Global Mobility re: assignments/transfers of individuals to Branches with Sales titles and responsibilities.
  • Compare actual activities with the legal constraints of a Branch in the relevant jurisdiction.
  • Put a plan in place to regularly determine if a Branch is the best legal form of conducting business, vs. subsidiary, etc.
  • Conduct annual trainings at significant Branches to ensure the activities align with the legal form of doing business.
  • Ensure the concept of PE is well understood by individuals accountable for the Branch operations.
  • What job titles are individuals allowed to include on their business cards?
  • How do Branch personnel represent themselves to the external trade?
  • Is there an objective benchmark (i.e., number of personnel) for Branches that triggers an automatic review?
  • Review the relevant Double Tax Treaty safe-harbor PE provisions.
  • Reputational risk: Consider how Branch activities impact the Tax ERM framework, and monitoring controls in place.

It will be interesting to track the activities of this controversy and analyze how to further minimize risks for Branch activities.

Tax Counsel: Proactive Risk Management

As governments and tax authorities are increasing their focus on transfer pricing issues, aggressive audit approaches and appeal techniques, multinationals should also ensure their integration with internal and external counsel is aligned.  This alignment should be in place prior to having to submit a reactionary response that is time constrained, complex and material in amount.  The following considerations are provided to promote discussion of this important topic among your teams and senior management.

  • What is the reporting structure for tax and legal?
  • Are dedicated tax counsel on the tax and/or legal team?
  • Does tax meet quarterly with internal/external counsel for status updates?
  • Have you quantified the benefit for justification of full-time internal tax counsel?
  • Where should internal tax counsel be located, contrasted with the tax team structure?
  • Should tax counsel have a full-time presence in aggressive jurisdictions for which appeals and trials are significant?
  • Who interviews tax counsel candidates?
  • Do you have a documented audit defense process that outlines when tax counsel are engaged?
  • How does tax counsel interact with the relevant advisors in appeal proceedings?
  • Who monitors the interaction of tax counsel, internal tax, business personnel and external advisors?
  • Does tax counsel review draft audit responses for transfer pricing issues and/or significant local taxes?
  • Who chooses local tax counsel for worldwide audits and tax proceedings?
  • Do you meet with local internal/external counsel when you visit the Business Units?
  • Should tax counsel be included in some, or all, meetings with tax authorities?  If so, should this start from the first meeting or when it becomes evident that tax counsel is required for current and future negotiations?
  • Who should negotiate issues and outline alternative options on an ongoing basis?
  • Does tax have a 360 feedback mechanism with internal and external counsel that is openly shared?
  • Does tax counsel participate in regular tax team meetings?

The above points highlight some ideas for consideration and discussions with senior management.  I look forward to your ideas and Best Practices for tax and legal collaboration.

Tax Newsletters: Proactive Tax Risk Awareness

Communication of emerging tax risks targeted at increasing awareness of Best Practices via a regional/global tax newsletter provides a timely and efficient vehicle for valuable discussions.  Examples of some benefits include:

  • Increased focus and awareness on important aspects of a Global Tax Policy and / or Tax Risk Policy.
  • Resource for regional / corporate tax team contact information inviting questions re: potential tax risks.
  • Communication vehicle for introducing emerging strategic tax risks, especially in developing markets.
  • Highlights lessons learned in forming new Best Practices.
  • Introduction of new Tax Team members around the world.
  • Provides updates on tax related benefits derived from collaboration on plant expansions, R&D credits, Patent Box and Innovation synergies achieving lower local effective tax rates, etc.
  • Forum for tax diligence procedures of new accounting policies.
  • Reference for upcoming tax training courses, webinars and related reference materials.
  • Tax topic focus, describing potential risks in non-technical language, such as PE – what it is, how to recognize it, its adverse impact on cash taxes, ETR, accounting / operational complexities, etc.
  • ETR overview, why it’s important.
  • Increased tax return disclosures and self-assessment determinations; local and global significance.
  • Country and Regional developments.
  • Tool for heightened awareness among Tax Team members, inviting newsletter contributions and ideas.

I invite your ideas.

 

Tax Leadership Center of Excellence: Be a Mentor

The tax function is unique, as it necessitates collaboration with all functions and levels within an organization.  Additionally, it should be viewed as a talent source for current and potential leaders, knowledge, creativity, planning expertise, governance and Best Practices.  However, individuals not connected to the tax function are often unaware of these valuable attributes that form a valuable resource for others to learn from.  Providing mentor opportunities provide the following benefits for Best Practices in Tax Leadership:

  • Forming additional alliances throughout the organization to achieve a win-win relationship.  
  • Providing a valuable asset for recruiting talent.
  • Increasing awareness of tax risks and roles locally, regionally and globally.
  • Forming a catalyst for Mentor Programs within other functions.
  • Teaching the art of conducting collaborative meetings and achieving buy-in for cross-functional programs.
  • Developing a strong foundation for future leadership roles.
  • Learning the importance of, and distinguishing, legal entity and operating structures.
  • Proactive and interactive leadership training for Tax Team members.
  • Recognition as a Leadership Center of Excellence.
  • Expansion of tax and risk awareness into non-financial functions of the company.

Providing a Tax Leadership Mentor Program will yield a multitude of benefits while increasing awareness and perception of Tax as a highly valued Center of Excellence for current and future leaders.  Partner with Talent Management and Organizational Development to make it happen!

A new role: Head of tax controversy

http://tmagazine.ey.com/insights/the-rise-new-role-head-tax-controversy/

This informative article focuses on the growing importance of tax challenges, with a focused role on tax risk and controversy.

Exchange of tax information among tax authorities, joint audits, reputational risk, tax governance, increased focus by the Board of Directors, importance of intellectual property, royalties, service fees, intercompany financing techniques and transfer pricing complexities are reasons why this role is expected to become more common in multinationals.  The following ideas are provided for thought and comment:

  • Does your company have a Tax Risk Officer / Head of tax controversy?  If not, has this idea been discussed with the CFO, CEO and Board of Directors?
  • How are the tax, treasury and legal functions integrated in a global approach to tax risk and controversy?
  • Are resources in place to facilitate a “joint audit” across several jurisdictions?
  • Are tools such as CAP in the US, horizontal monitoring in Netherlands, etc. being used to provide certainty and timeliness?
  • Are APA’s being used as a tool; who is functioning as the champion for this initiative?
  • Tax amnesty awareness; are you aware of these initiatives on a global basis?
  • Who coordinates legal counsel, internal and external, on audits, appeals and court proceedings?
  • Do you have a process for consideration of tax counsel at certain stages of an audit?
  • What training is provided to finance and other functions to increase awareness of tax risk areas?
  • New transfer pricing legislation; who is responsible for reviewing risks and transfer pricing governance / documentation.

The above thoughts may inspire conversations re: this role to match the increased focus by tax authorities and governments.

OECD Draft Handbook on Transfer Pricing Risk: Public information

Click to access Draft-Handbook-TP-Risk-Assessment-ENG.pdf

OECD published this draft handbook on April 30, with comments due by Sept. 13.  I highly recommend reviewing the entire handbook.  Section 4.5 of the Handbook outlines the use of publicly available information for identifying overall risk assessment.  We are all aware of this information, although I will share some thoughts on being proactive in forming Best Practices around this topic.

Company website:

  • Does tax review the web content on a regular basis to ensure there are no innocent misstatements to defend.
  • As the web content is updated for marketing, sales and other relevant information, does tax receive a copy of the updates prior to releasing them to the public.
  • Are any of the statements on your website in conflict with your stated transfer pricing or other tax methodologies.
  • Does the website contain information on legal presence in each country; if so, what is the alignment process with tax.

Statutory financial information:

  • Many countries provide this information to the public; are these financials reviewed to ensure consistency with transfer pricing methodologies either internally or an external advisor. 
  • Additional disclosures increase every year; how familiar are you with new disclosures on a global basis.  Is there a process that can be implemented to identify tax sensitive information.
  • An individual with tax training should review this information prior to finalization to ensure there are no PE, transfer pricing or other tax risk areas addressed.

Coordination of Publicly Available Information:

  • Is there a central index listing all publicly available company information on a global basis.
  • Is this a process for which someone can be a champion to ensure timely updates.
  • If tax disclosures are prepared for public use, are the disclosures of taxes paid by country, etc. consistent with the statutory financial information that is available.  Should there be a process to rationalize, or explain, any discrepancies.
  • Are press releases reviewed by tax to ensure consistency of tax methodologies and minimization of potential tax risks.
  • Is issuance of publicly available information centralized or decentralized, depending on the content.
  • If comments are issued on this draft, who ensures the content is internally consistent since it will be on the OECD website.

 

 

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