New age of transparency / reputational risks
The latest EY tax risk and controversy survey series, entitled A new mountain to climb, provides some insights re: preparing for and proactively management tax / reputational risks. A link to the report is provided for reference:
Click to access ey-managing-tax-transparency-and-reputation-risk.pdf
- Media coverage of how much companies pay in tax / low effective tax rates is extensive, although engaging with the media is seen by many companies as a “no-win” situation.
- Leading companies have transformed the process of communication for tax risks and controversy to internal and external stakeholders.
- Transparency is providing information to tax authorities re: how much tax is being paid in other jurisdictions as a tool to decide if the company is paying enough tax in their jurisdiction.
- Global disclosure and transparency requirements will continue to grow in the next two years.
- Transparency readiness of companies is a significant and underestimated need.
- Direct ERP access by tax authorities represents a next phase of risk assessment.
- Transparency readiness can help mitigate reputation risk.
- Reputation risk strategy elements:
- Actively monitor the changing landscape.
- Assess readiness/desire to respond.
- Enhance communication with internal and external stakeholders.
- Gain insight into the total tax picture through the lens of public perception.
- Decide with whom the company wishes to communicate.
- Embed reputation risk thinking into core business strategy.
- Transparency is the new norm, and (media) reputation risk may be a permanent risk.
Transparency demands have created a new toolbox required by all multinational organisations.
A tax policy and reputation risk strategy should be essential tools in a comprehensive tax risk framework. The EY report is required reading for all parties interested in learning more about tax risk trends and Best Practice ideas to proactively address the new world of transparency.