What we offer

Depending on the sponsorship at hand of senior management we  could start with writing a tax strategic plan for the short and long term and perform assessments to measure performance and set priortities.  However, if the startpoint is a zero measurement we show that such beginning could have an endgame.

Below scope, description and PowerPoint shows an eagle eye view

For questions please contact us.


Business challenges

In response to increased scrutiny from senior management, tax administration and other regulators, many businesses are now formally documenting their indirect tax strategy and implementing formal processes to evaluate and approve planning ideas. A strategy may be defined as:

"A plan or method for obtaining some goal or result. The responsibility of management to identify the key processes of their organization, measure their effectiveness and efficiency, and initiate improvement of the worst performing processes."

For leading companies, a tax strategy is a dynamic framework that is shaped by internal and external drivers. An indirect tax strategy should cover all business locations and should be aligned to the overall business strategy.

The benefits of a well-defined and documented Indirect Tax Strategy that is linked to the overall business strategy include:

  • Increased clarity of a business’ risk tolerance for indirect taxes. This should facilitate the coordination of opportunities with the broader commercial objectives
  • Improvements in the consistency and efficiency of indirect tax processes
  • Indirect Tax put on the agenda of important business and financial functions
  • Strengthens the monitoring and management of indirect taxes in decentralized and geographically dispersed locations
  • Identifies opportunities to improve systems, processes and controls
  • Identification of areas where extra resources for indirect tax are necessary

 


Scope

The strategy and the group’s overall approach to indirect tax compliance, risk management and indirect tax planning should be clearly documented, signed-off my senior management and regularly reviewed to ensure that consistent minimum standards are defined and implemented. The approach should also implement an effective communication plan, as part of the change management process, to ensure all impacted entities understand what is required of them and clarify their commitment to the strategy.


Group business strategy and indirect tax objectives

Document and challenge the overall indirect tax strategy of the group to ensure there is clear linkage to the business strategy and how the indirect tax strategy contributes value to the business’s overall objectives.


Risk management

Define the indirect tax risk management framework of the group covering processes both within and outside the tax function. This includes the development and maintenance of a group indirect tax risk register, and the review & oversight of processes of decentralized and overseas locations. Define the group’s overall indirect tax risk tolerance parameters which should be applied to all significant transactions.


Risk process


Governance and performance

  • Strategy Oversight and Sponsorship - Define the principles and policies on which the group’s indirect tax processes are based. It should also include the process on how the strategy will be approved by the Board and communicated to the business.
  • Management reporting of indirect tax risk - Describe the reporting lines and its frequency from the operating teams to senior management e.g. indirect tax to Head of Tax, the CFO and Board/Audit Committee. Reporting should cover key indirect tax compliance and the reporting of issues globally including significant transactions and tax administration audits. Define the reporting processes from overseas and decentralized locations to the group indirect tax function relating to compliance, transactions, audits and exposures.
  • Indirect tax objectives and key performance indicators  KPI) - Define the KPIs for the indirect tax function to show indirect tax performance Indirect tax function KPIs should include performance measures on people, efficiency, growth and quality.
  • Relationship with tax administration - Describe the requirements for dealing with the external tax regime, including who has authority to negotiate with the tax authorities in relation to potential audits and penalties.

 


People and organization

  • Roles & responsibilities and reporting lines - Outline the indirect tax related roles and responsibilities (including review and reporting lines) of the Group including, but not limited to, the following stakeholders: the Board, Chief Financial Officer, Head of Tax, Business Units, Finance team, Tax Function, Local indirect tax teams,
  • Resourcing - Define the skills and roles that are required to deal with indirect tax matters in each location. Document career development, role rotation and succession planning processes.
  • Training - Describe the indirect tax training requirements for staff, and the awareness training to be provided by indirect tax to the finance and business teams and other stakeholders (e.g. procurement, IT, logistics, internal audit, HR, legal).
  • External tax advisors - Provide guidelines on the use of external advisors (i.e. for industry insights, technical updates, and input and to cover skills and resource shortages) and the authority to approve the use of external advisors in various jurisdictions.
  • Alignment with business units - Describe the responsibilities, quality levels, controls and reporting between indirect tax and the business units and ensure this is properly represented in Service Level Agreements.

 


Process and controls

  • Indirect tax planning and significant business transactions - This should cover non-routine or significant transactions and the requirement for review & approval by the indirect tax function prior to execution of the transactions. It may also be appropriate to include more detailed guidelines around the type of indirect tax planning and whether this is allowed according the business’s tax policy. These guidelines should be approved by senior management and may include issues such as the likelihood of tax administration to challenge and litigate the potential change to the group’s indirect tax risk profile and key reputational risk issues. This may also cover documented planning evaluation and acceptance criteria, planning implementation review processes and an ongoing planning review and monitoring processes. Describe the requirements for other stakeholders (e.g. finance, procurement, IT, logistics, internal audit, HR, legal) to seek Indirect Tax input early in the process.
  • Indirect tax compliance and financial reporting - Describe the requirements of the group related to indirect tax compliance and financial reporting (i.e. data gathering and review, and preparation and review of indirect tax returns and provisions) across all jurisdictions. It may also be appropriate to document specific responsibilities, controls and systems in relation to each process.
  • Internal auditing of indirect tax - Describe the internal audit program, including any processes, policies and tools used, for indirect tax focusing on the testing of effectiveness of internal controls for key risk areas.

 


Technology and data

  • Finance & business systems and data - Describe the finance and business systems used and the requirement for indirect tax training and input in relation to accounting and business systems (e.g. review of indirect tax set-up of accounting systems and indirect tax involvement in business system upgrades to ensure global consistency in their application).
  • Indirect tax systems - Describe the systems used by the indirect tax function including how they control the integrity of data used for indirect tax filings.
  • Workflow information and management - Document in detail the indirect tax operating processes and procedures including workflow and information management, resourcing and technology requirements.
  • Reporting and Workpapers – Define the detailed preparation and retention guidelines for both paper and electronic documents. It may be appropriate to include guidelines on mandatory archiving.

 

 


See for further detail our chapters 'An indirect tax strategic plan', 'Structure the tax function', 'Setting the objectives of the tax function, 'Roadmap to indirect tax function effectiveness' and 'VAT control framework'.

 



Take aways 

We combine technical knowledge with industry understanding and knowhow of technologically advanced tools and methodologies available in the market or developed by ourselves.

  • Focus on tax processes that could be improved
    • Manual process: same data requests are made by different stakeholders
  • As Is assessment
  • Anticipate future changes and the data needed
    • What are tax trends?
    • What is happening locally and what should be considered across jurisdictions where you operate?
    • Anticipate new stakeholders and their data needs or requests (internal and external)
  • Define scope and actions for short, mid and long term
  • Write business case for change
  • Realize sponsorship for implementation
  • What tax data is requested and by whom?
  • What tax process can be improved and what can be automated?
    • CIT, VAT, tax data warehouse
  • What is the Return on Investment?
    • Hard saving: process improvement
    • Meeting (new) tax requirement
  • What systems are in use: SAP, Oracle, etc
    • By which entities?
  • How many end-use computing tools (e.g. excel spreadsheet) do we have?
  • How do we avoid an ad-hoc solution?
    • Understand the bigger picture
    • Real problem and not the symptom

Technology-related tax risk: understand and address the potential harms and benefits of (new) technology.

Ascertaining proper IT support for ensuring efficient, timely and reliable reporting.

VAT should be considered in every aspect of the process, from concept through completion and beyond. Managing by design — looking at any process or transaction from end to end and factoring in all the requirements and controls essential to designing and optimizing a compliant VAT process.

We speak the language of the business and IT and no translation is needed.

Although the potential application is just to the UK, you will clearly want to consider being consistent across jurisdictions.

The tax department objectives and strategies are aligned with the company’s business objectives. Updates take place periodically.

Without a proper tax policy it depends on your personal influence within your organization to kick-start a change. Often that results in a fragmented approach, as not all stakeholders will be convinced. The outcome is that this will negatively impact defining standardized and global controls.

To ensure that group companies act consitently globally and to ensure that group companies benefit from best practices applied by other group companies, but also to ascertain acquaintence with policies and subsequent appropriate application of tax policies across the group.

Policies, procedures, working instructions and manuals are accessible and distributed to relevant employees.

To ascertain input from tax department before transaction, changes in activities, operations, structure and ensuring that unacceptable tax risks will be prevented where possible. Ensure BU's act in line with tax strategy.

VAT should be considered in every aspect of the process, from concept through completion and beyond.

Looking at any process or transaction from end to end and factoring in all the requirements and controls essential to designing and optimizing a compliant VAT process.

The key to success in the management is the ability to translate tax knowledge into workable business processes.

Identify the lowest performing indirect tax processes that have the most direct impact on the company’s business and tax objectives. These are then targeted for improvement. Generate and select a set of solutions to improve the performance.

The tax department risk management strategy differentiates between strategic, operational, financial and compliance risks and contains detailed action plans for managing these risks. Managing risk is about making decisions at all levels of an organization, to limit the effect and likelihood of threats happening and to increase the effect and likelihood of opportunities.

Assess that tax advice given is also correctly implemented:

  • Factual pattern has not change
  • Procedures and risk monitoring functions accordingly
  • Configured in system(s) or manual processes
  • etc.


And impact of changes in business, laws and regulations on implemented tax planning.

In order to quickly gain insight into the level of tax risks (i.e. calculation of the potential assessment), statistical sampling can be used. By selecting a few elements (euros), the reliability of the composition of tax items can be determined to a high degree of certainty.

If not correct, the tax authorities might seek to recover tax due from this supplier via a levy of a tax assessment. If the applicable VAT rate is 25%, the tax assessment will be 25/125 of the consideration charged. This assessment will be increased with interest and penalties to determine the total tax burden.

In order to solve a problem, we also have to identify it completely, and not just settle for the most apparent symptom of that problem.

In order to fix a problem, we have to first understand the root cause thoroughly. We have to accept the possibility that the problem involves far more than what is immediately apparent and will require more work than is estimated at the beginning. 

Define the causes of defects, measure those defects, and analyze them so that they can be reduced.

  • How did the results happen?
  • Why did they happen?
  • What specifically caused them to happen?

An ERP review should highlight where the VAT configuration could be improved or if additional control measures should be added to the business’s Tax Control Framework.

In order to get senior management's buy-in for change and accept indirect tax priorities it is important that proper visibility exist of the amount of VAT/GST under management in the key jurisdictions.

To avoid any reputation damage and negative publicity around taxes, through building a tax control framework.

The internal tax function should always have insight into the areas for attention through this logbook. The risk register should contain the following labels: number, name of the risk, risk definition, cause for the risk to occur, risk category and the risk owner.

  • Apple’s and Coca Cola’s tax assessment might exceed $2,5 bn
  • Material and reputational risk
  • Will ‘tax assurance’ mandatory be reviewed by External Auditors
  • What information will be requested?
  • What will be the impact on Internal Audit?
  • How will review likely take place (e.g. Big Data discussions)
  • What is the overlap with tax authorities tax audit approach?

Ascertain that unacceptable but existing tax risks will be identified.

The tax department consists of the right number of tax personnel and the right level of skills and capabilities.

Creating and maintaining an efficient, effective, pro-active, highly skilled tax department identifying opportunities and managing tax risk and thereby creating value

To develop and apply a people development, recognition and retention model and to allocate resources in line with employee skills and prioritized business requirements.

Individual career development plans created and maintained and career paths for tax professionals to senior roles within and outside tax department encouraged.

The added value to involve the tax department is understood by internal customers (e.g. business, legal, procurement, supply chain, etc).

The efficiency and effectiveness of the tax department is periodically measured and compared with financial and operational KPI's. Interaction with the business is evaluated and improvement points are identified and action plans executed.

The cost effectiveness of the tax department is periodically measured. Outsourcing is considered as an option for routine work.

The quality of the output of the tax department is periodically assessed both internal and by external parties (internal audit / independent testing / external parties).

A systematic approach exists to tax planning using consistently applied criteria and sufficient consideration is given to the extent and type of work carried out by external advisers. Tax planning is applicable to cash flow planning and impact analysis of changes in business and tax laws.

The resources and budget is aligned with the outcome of the tax risk assessment: tax resources spent most of our time on high risk areas. Ensure that tax department has sufficient resources and budget to fulfill its role and carry out the corresponding responsibilities.

Do not spend time on further reducing risks that are already at an acceptable level.

Tax department professionals are appointed to support multidisciplinary teams during non routine transactions and or substantial business transactions.

To ensure that group companies act consistently globally and benefit from best practices applied by other group companies. To create and raise awareness on tax policies, tax risks and changes in laws & regulations.

Lack of support by management means that any improvements in quality are often temporary. The aim is that management will be encouraged not only to support change, but to become actively involved in making it happen.

Identify the key processes of their organization, measure their effectiveness and efficiency, and initiate improvement of the worst performing processes.

In order to allocate resources to risk and cost saving areas that matter, we determine together the level of risk appetite that the company considers (non)acceptable.

Having defined acceptable levels of risk leads to resources not having to spend time on further reducing risks that are already at an acceptable level.

If the startpoint is a zero measurement we could show that this beginning could have an end game: how a tax strategic plan for the short and long term should look like and what needs to be done to get there.

A split should exist of roles, functions and responsibilities between tax department and the business are well documented in manuals, procedures and working instructions.

A typical multinational today might look like a Rube Goldberg contraption—a complex of moving parts that must connect one to another for tax, regulatory, and reporting purposes.

Tax department utilizes leading edge tools and technologies in an integrated manner fully leveraging the functionality offered.

To apply an efficient data gathering process including standardized input by other departments and multiple use of data.

Easy access to data and the majority of tax data is collected once and reused by departments.

Spreadsheets are replaced by technology tools and systems to make information more efficient available.

The ability to contribute and exchange knowledge is technology enabled and fully supported by the tax department.

Improvement points are identified and action plans executed/implemented.