Strategizing Multinational Tax Risks

Click to access 2012-13-Canadian-tax-governance-survey.pdf

This insightful survey, published by Ernst & Young, polled Canadian executives from 120 companies to review the tax level awareness in organizations.  The findings include the following observations:

• 56% of non-tax business unit leaders are unfamiliar with risk management policies.
• 7% of time spent by the tax function is devoted to tax risk management reporting.
• 15% of tax risks and opportunities are identified timely.
• Over 50% of the respondents are planning to improve existing tax risk policies and procedures.
• Significant areas of tax risk requiring improvement include transfer pricing processes and controversy, foreign tax planning, and legal entity accounting.

The findings should be compared to current Best Practices within every organization.  Some ideas for consideration include:

1. Develop / review the Tax Risk Management Policy.
2. Communicate all significant tax risks, and corresponding Tax Risk Management Policy, to business leaders globally.
3. Prioritize tax risk awareness, including reputation risk, in business reviews and training.
4. Measure the time spent by the tax function on tax risk awareness and internal controls.  (Refer to 23 June blog posting)
5. Develop a system to measure tax risks on a quarterly basis to address potential issues timely.
6. Conduct tax risk workshops with the business leaders.
7. Review significant risks, noting areas for improvement, and establish a timeline to address such risks.
8. Address tax risk management as a priority agenda item for the global tax function.
9. Develop an efficient process to address tax controversies around the world.

Tax risk awareness is a critical issue that should be prioritized within an organization, ensuring alignment with the CFO and Board of Directors.

Related articles

• Ernst & Young Insights: Tax risk management is an enterprise-wide issue (business.financialpost.com)