KPMG has issued a 2019 survey benchmarking tax disputes, linked for reference.
The report is divided into four sections:
- Tax audits and disputes-the changing environment
- Tax dispute management today
- Leveraging technology
- Tax dispute management of the future
Some observations in the report:
- Tax authorities are becoming more aggressive, with less appetite to settle
- Increased penalties
- Cooperative compliance is still the highest rated tool to resolve disputes
- More focus on international transactions
- More information sharing by tax administrations
- Dedicated resources in multinationals for dispute resolution, including global head of controversy
- Hiring talent with dispute management experience
- Internal process for handling audit disputes
- Dispute management budget > 10% of tax budget
- Tax dispute technology, apart from Excel, is still in its infancy
- New trends: Global head of controversy, dedicated budget/staff/technology, escalation/communication processes and a global tax audit software platform
As audits escalate, disputes will likewise increase. Accordingly, this issue warrants additional attention especially with respect to processes and talent.
KPMG provides a timely and relevant update of tax dispute resolution issues, coupled with Best Practice ideas. The publication can be accessed from this link:
A summary is provided for quick reference:
- US: New IDR process: Required (new) IDR process for all large-case exams: IDR Collaboration (carrot) & delinquency notice/summons procedures (stick)
- Risk from whistleblowers: Current climate and Best Practices, including avoidance of retaliation, ethics hotline, procedural awareness, tax dept. procedures, and what to do if you suspect whistle blowing
- IRS practices, various items of interest
- Global tax disputes, including a focus on UK GAAR (also refer to a prior blog post)
This publication provides insight into today’s tax challenges and risks, to be mitigated by Best Practice ideas that should be an integral part of all multinationals tax framework.
It will be interesting to note developments into the new procedure by IRS as demonstrated by the agents performing the exam, as the summons procedure process is mandatory and has no exceptions. Additional time should be spent understanding the issue raised by IRS, as well as collaborating on the draft inquiry, to benefit from undue data collection and audit inefficiencies.
Additionally, the whistleblower comments should be used to test, modifying as necessary, current internal governance procedures. Such procedures should be reviewed, tested, and modified on an annual / recurring basis.