- The Role of the Head of Tax: Mastering Compliance, Strategy, and Value Creation
- Embracing Corporate Fiscal Responsibility: A Pledge to Sustainable Business Practices
- A VAT/GST strategic plan: approach and scope
- Company's 'governance', 'operation' and 'infrastructure'
- Strategies, approaches and models
- Structure the tax function
- Gain awareness and acceptance of senior management
- Setting the objectives of the tax function
- Audit defense strategy
Company's 'governance', 'operation' and 'infrastructure' - Operational Challenges and Areas for Improvement
Page 3 of 4: Operational Challenges and Areas for Improvement
Operational Challenges and Areas for Improvement
In practice, we often observe that few, if any, performance targets are established or monitored, leading to unresolved issues as accountability becomes unclear. From a best practice standpoint, it is essential to set targets and establish technology-enabled KPIs that allow for regular monitoring—both formal and informal. These targets should also reflect the interactions between the tax function, the business, and other stakeholders.
A common challenge is the lack of clear procedures for critical VAT processes, as well as inconsistent evaluation criteria for VAT planning. Essential VAT information required for compliance, financial reporting, and other tax activities is often not readily accessible throughout the year. To support informed business and tax decisions, this critical information should be produced frequently and made available as objective evidence.
A systematic approach to tax planning is necessary, including well-defined evaluation criteria, such as guidelines for engaging external advisors. For instance, when corporate entities seek advice and assistance from external consultants, a policy may stipulate that all written advice be provided in English and that the tax department must be informed before consulting these advisors, especially on material tax issues.
Tax risk management should continuously inform operational decisions and strategic direction. To facilitate this, a uniform tax risk process must be implemented, ensuring a structured and consistent evaluation of potential events that could adversely impact the company’s objectives. This approach should also account for missed opportunities, such as potential savings.
Resource allocation and budgeting should align with the outcomes of the tax risk assessment. Given limited resources, it is crucial to focus efforts on high-risk areas. The indirect tax department should actively identify opportunities to optimize tax planning across jurisdictions, business units, and tax types.
For significant non-routine transactions, such as mergers and acquisitions, all indirect tax liabilities must be assessed before the transaction is finalized. This includes considering all regulatory, legal, and corporate record retention requirements, as well as identifying relevant indirect tax risks in consultation with the indirect tax team.
The indirect tax department's risk management strategy should differentiate between strategic, operational, financial, and compliance risks, and it should include detailed action plans for managing these risks. This also entails adopting an efficient internal control framework that is fully implemented for all tax functions globally, with reporting on internal controls as part of its performance indicators.