The OECD has, via a pilot program, developed five stages of ERM maturity against which tax administrations can self-assess their progress, for which anonymous data will also be helpful for the OECD going forward.
Multinationals have employed such tools for several years, and tax administrations can now assess their progress and risk status going forward.
The Enterprise Risk Management (ERM) process should be a coordinated process envisioning a multinational’s tax risks around the world.
The evolution with BEPS, ongoing developments re: digital taxation, multilateral instruments (MLIs) becoming effective, permanent establishment (PE) changes, and countries enacting unilateral legislation inconsistent with international norms are some examples why international tax/transfer pricing should be among the top ten risks of most multinationals.
Legacy ERM procedures may not be as effective in the current tax world as they were recently. However, have multinationals really incorporated these changes into the ERM process re: uncertainty and risk management?
Members of the Board of Directors, responsible for ultimate risk, should also be asking this question as a reminder/refresher for the ERM process. Tax executives, knowledgeable of such risks, should also be proactive in this process to educate others about recent global changes that may impact their organization.
Questions and challenges for ERM should be developed as new tax legislation is becoming more complex and uncertain in countries around the world.
Corporate responsibility (CR) reporting is becoming more of a norm for MNE’s, illustrated by KPMG’s report as referenced herein.
Apart from policies, such as Human Rights, that should be a basic component of every MNE’s policy and referenced to the UN standard, tax policies are becoming more of a public norm than ever before.
A UK tax risk strategy is required to be published by every significant UK taxpayer by 12/31/2017 on a public website describing the tax risks of the UK group and how they are managed on a macro and micro based level.
Global tax policies are also proactively published by major MNE’s as part of their Best Practices and Enterprise Risk Management efforts.
A basic global tax policy, published or not, should be a primary tool integral to Board and company governance. Tax risk management, including documentation thereof, will become more of a shout than a whimper by NGO’s, parliamentarians, tax advisors and internal governance standards of every MNE.
Tax policies are also becoming more integrated with business policies in corporate governance.
To the extent policies are lacking in an organization, now is the time to address this important aspect of risk management and Best Practice governance.
Click to access kpmg-survey-of-corporate-responsibility-reporting-2017.pdf
Strategizing Multinational Tax Risks 