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Mark Schofield: Would like more focus on tax risk management |
Around two-thirds of companies attending a tax risk management seminar in London did not have a written tax risk policy that was signed off by the board.
This was despite almost 80% of respondents to a survey at the event believing that the threat of tax risk has increased in the last two years.
Tax risk management should be higher up on the boardroom agenda according to those who took part in the survey at the PricewaterhouseCoopers seminar.
Around two-thirds of respondents also said that they did not think that tax risk policy was at the centre of businesses decisions. Mark Schofield, corporate tax partner at PricewaterhouseCoopers, believes that this is because of the traditional image of tax.
"If you look at history, tax has not always been at the core of the business agenda" he said. "There is the famous phrase that tax is something done by people down the corridor. But all business activities have a tax implication and companies are starting to understand that the historical perspective is not correct," he added.
Tax risk management survey |
| Do you have a written tax risk policy that is signed off by the board? Yes: 36% No: 64% Are your tax risk policies embedded in your business operating policies? Yes: 36% No: 64% Over the last couple of years, do you think the level of tax risk has: Gone up: 78% Stayed the same: 16% Gone down: 6% How confident are you that the appropriate control environment exists, in respect of al taxes paid, in your group globally? Very: 6% Reasonably: 62% Not at all: 16% Don't know: 16% Source: PricewaterhouseCoopers |
Just 6% of respondents said they were very confident that the appropriate control environment exists globally.
"Multinationals need to worry about what's going on everywhere in the world," Schofield said "Have the tax returns been filed in every country? Has legislation changed? There is an increased risk if multinationals are operating in markets where the legislation is constantly changing. The larger the group, the greater the risk."
According to Schofield, an important element of global tax risk is the role of a company's finance directors throughout the world. "Multinationals should clearly articulate the responsibilities of local finance directors," he said. "There has to be a good relationship between the head of tax and the local finance directors." Schofield added that there should be quarterly reporting by local tax directors on legislation changes and tax authority disputes. "Companies should make sure that tax teams are involved in major transactions and should perhaps work on the outsourcing of tax returns around the globe," he added. "It's about building relationships, communication and reporting."
Schofield thought that each firm and industry had its own specific tax risks. He said: "Companies operating in emerging markets have a lot of tax risk because of the rate of development but, say, financial services firms also have a lot of risk because of the amount of transactions that they deal with."
Despite the survey results, Schofield is confident that tax risk will become more important to firms.
"Tax risk management is an area that companies recognize is important. HMRC [the UK's tax collectors] is interested in involving the board in tax risk management" he said, adding: "This is an issue that is being taken more seriously. In two years' time there will be an increased focus on tax risk management."
"Companies want no surprises. Most companies understand that they have to have effective control of tax risk and if you don't have a strategy to find out what the risks are then you don't have control" CJ
