Audit committee agenda: Tax risk in focus

KPMG has provided a valuable reference re: 2015 audit committee topics, providing insight into company risks and the importance of governance.

The following extract, from the report provided as reference, addresses tax risks in the following manner:

Pay particular attention to the global “tax transparency and morality” debate being driven by notions of “fairness”and “morality,” and consider the impact of tax risk on the company’s reputation.

Tax is no longer simply an expense to be managed; it now involves fundamental changes in attitudes and approaches to tax globally.

Ensure that tax decisions take into account reputational risks and not simply whether the company has technically complied with tax laws.

Monitor OECD and governmental efforts globally to address perceived transfer pricing abuses.

Help shape the company’s tax risk appetite, and establish a clear communications protocol for the chief tax officer to update the audit committee regularly. Help ensure the adequacy of the company’s tax resources and expertise globally.

Highlights of future trends:

Transparency
Reputation risk
OECD monitoring
Transfer pricing abuse
Tax risk appetite

To the extent the Audit Committee has not inquired into BEPS, tax risk frameworks, OECD Actions and transfer pricing governance, a proactive effort should immediately begin to align the Board with the MNE’s tax risk posture and ongoing governance.

It is imperative a robust tax risk framework is established and communicated effectively.