Strategizing International Tax Best Practices – by Keith Brockman

Posts tagged ‘risk committee’

Tax risks: Audit committee perspective

Deloitte’s Audit Committee Brief includes a summary and questions outlining Risk oversight and Tax considerations for audit committees.  A link to the publication is provided for reference:

http://deloitte.wsj.com/riskandcompliance/files/2015/01/ACBrief_NovemberDecember2014.pdf

Key observations:

  • Audit committees may have a risk committee (Will this be a continuing trend?)
  • Tone at the top is imperative for effective risk oversight
  • Insightful questions for consideration:
    • What internal controls are in place to address significant tax risks?
    • Is there a clear approach and justification for where risk issues are placed?
    • Is there a widely communicated process to quickly bring risk-related issues to the Board?
    • What issues should the audit (risk) committee be aware of when evaluating potential risks?

Risk governance is rapidly becoming the new norm, both by tax administrations to understand and rate risks of a taxpayer as well as an effective tax risk policy and framework for a multinational to identify and mitigate risks.  This trend will require additional resources to fulfill such commitments, immediately and ongoing.  

Board Oversight and Responsibilities for Tax Risk Management

http://www.cica.ca/focus-on-practice-areas/governance-strategy-and-risk/directors-series/director-briefings/item74308.pdf

http://www.itdweb.org/documents/Erle.pdf

Two excellent articles are linked to review Best Practices for tax risk management from a Board perspective.  The first article is by the Canadian Chartered Professional Accountants and poses various questions and concepts for Directors to ask.  The second article, approached from a practitioners point of view, was written by a KPMG partner.  A related article is also attached as reference at the end of this posting.

The first article reviews various tax risks, including risks of tax planning and subsequent implementation, financial disclosures, tax compliance and audits.  Examples of interesting insights and questions include the following:

  • Are outside consultants an integral part of tax planning?
  • Are direct, and indirect, tax risks addressed?
  • What are the capabilities of internal resources?
  • Are post implementation monitoring processes in place?
  • What are the trends of tax authorities in major jurisdictions?
  • How does the company keep up with change?
  • Is reputational risk considered in tax appeals or court filings?
  • What is the mindset of internal management in foreign jurisdictions re: alignment of overall strategies?
  • What are the source of tax planning ideas?
  • Have tax saving opportunities been missed?

The second article entitled “Tax Risk Management and Board Responsibility” defines a  tax philosophy and establishment of a Tax Risk Framework.  A tax philosophy pyramid is presented that correlates to tax risk.  In addition, the following components of a Tax Risk Management Strategy are discussed:

  • Strategy
  • Risk management
  • Tax profile, relationships and communication
  • Processes and technology
  • Internal qualifications of tax staff

Both articles are excellent reading, and should form a basis for Best Practices to ensure alignment with Board responsibilities and expectations.

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