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With today's expanded regulatory focus, are companies truly prepared for greater tax scrutiny?
Increased scrutiny over the control and management of tax risk is inevitable these days given that Sarbanes-Oxley and its Canadian equivalents are demanding greater accountability of senior management, auditors, audit committees and boards. And considering that revenue authorities are aggressively pursuing their mandate to examine favourable tax-reduction arrangements often held by large companies.
In such a controlled environment, corporate tax managers are becoming more reluctant towards taking risk in their companies because they and their advisers must now be aware of the transparency expectations of regulators, management, and board members.
In this Canadian Tax Foundation paper, Deloitte tax partner John Stacey reflects on the current regulatory environment, new responsibilities facing CEOs and CFOs, the working atmosphere of transformed audit committees, a proper definition of tax risk, and the future directions companies will likely have to take, such as, developing a systematic and sustainable approach to communicating tax issues to stakeholders. He sees a positive side to managing tax risk, as revenue authorities unite in their efforts to influence decisions on prospective transactions, and through legislative means of gathering information and disclosure.
A four-phase integrated approach
A company's risk management system should incorporate several elements to deliver a flexible, fully sustainable system that measures and manages tax risk and opportunity. This paper outlines a four-phase tax risk management approach that is fully integrated into the organization by focussing on all business areas that affect tax:
1. risk identification and assessment within the business
2. implementing risk controls
3. xamining the execution of existing tax plans and strategies
4. ensuring that the underlying policies have been established.
This approach will ultimately measure and manage tax risk and opportunity, and produce significant benefits for overall tax risk management. To read the full paper, download “ Managing tax risk” here.
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Source: Deloitte & Touche LLP - Canada (English)
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