Strategizing Multinational Tax Risks

EY’s article highlights the importance of planning a proactive risk strategy re: reputation risk.  A link to the article is provided for reference:

http://taxinsights.ey.com/archive/archive-articles/six-actions-that-help-you-mitigate-reputation-risk.aspx

Key observations:

• Six distinct actions
  • Actively monitor the changing landscape
  • Assess readiness/desire to respond
  • Enhance communication with stakeholders
  • Drill into the details to prepare the total tax picture
  • Decide on whom communication is  to be established
  • Embed reputation risk into daily business strategy
• Questions for self-assessment, gleaned from this topic:
  • Who monitors media coverage of the company
  • Who monitors social media channels re: the tax function
  • Who monitors new tax disclosures to assess trends and new compliance requirements
  • Is the tax structure transparent re: taxes paid by country
  • Do profits and taxes paid align?  If not, rationalize the gap
  • Who follows tax litigation in each jurisdiction
  • Is the (tax) risk officer aligned with tax strategies
  • Are Board members aware of new documentation requirements to assess tax strategy around the world
  • Has the legal team been educated on BEPS actions and related company strategies
  • Is there a metric to measure reputation risk
  • What new disclosures are taking place
  • Will the company address questions from the public
  • Should more tax information be disclosed to mitigate reputation risk
  • What information is shared with investors; does the current process need to be reviewed
  • Is tax risk an element of every new business initiative/strategy
  • What functions are aware of BEPS and the changing landscape

This article is a snapshot for an increasingly important risk: a company’s reputation.  As new tax disclosures emerge around the world, interrelated with Board awareness and acknowledgment, it is imperative that the subject of reputation risk is addressed as an immediate priority by all companies.  As soon as there is damaging press, truthful or not, it may be too late to respond.

This subject is also of importance for tax administrations: tax information is confidential and technical areas may be unclear, thus a company’s rights should be protected while an issue is raised, investigated and ultimately resolved.  The tax administration’s reputation risk is also of paramount importance, as it looks to increase trust and establish an understanding of a company’s functions, assets and risks within the relevant jurisdiction.