Strategizing Multinational Tax Risks

Most MNE’s have an internal audit department, although the extent to which this audit team minimizes tax risks and enhances tax governance is generally not identified.

New out of the box ideas may be necessary for the internal audit function to address the evolution of transfer pricing and new challenges that will surely bring additional appeals and risks of double taxation.  

With the advent of the OECD’s BEPS Action Plans, parallel UN actions, increased tax audits and tax risks re: transfer pricing documentation, there has not been a significant increase in the role of internal audit teams to monitor and minimize potential tax risks, including double taxation. There is also a resource limitation on tax professionals, thus internal audit may provide a win-win opportunity.  The near future may include the addition of an internal tax audit team and/or adding tax professionals to the team.

Best Practice ideas for internal audit collaboration:

• Tax topic training, including OECD’s BEPS actions
• Tax risk awareness training, including Permanent Establishment (PE) and transfer pricing methodologies
• Rotation of tax professionals in the internal audit team
• Knowledge of tax policies, including intercompany service agreements and internal governance
• Issues / trends in tax audits and hot topics
• Treasury / financing issues subject to internal governance

The ideas are meant to promote thought and consideration for Best Practices.