Richard Cornelisse

Indirect Tax And Managing Reputational Risks

In Audit Defense, Business Strategy on 27/04/2014 at 9:08 am

Reputational risk is a key element in tax risk management as it is it not only considers individual tax risk but also sees how tax risk may influence the positions in other areas, negatively or positively.

If a company is associated with unacceptable behaviour, the suppliers or vendors may choose to change contractual relationships and it could impact shareholders value.

For management purposes the objective is to predict the mindset of the public opinion.

Chris Needham, GE’s Global VAT and GST Director: “Look, for example, at the UK. There have been some abusive avoidance schemes in the UK over the years. Most advisers have left these behind them, but as a result, the tax authority has increasingly been addressing boards about controls and processes, asking: “Is this the kind of thing that you want your business to be seen to be doing?” They’re trying to change behavior at a board level by changing board attitudes.” From EY Tmagazine Issue 8

A non-exhaustive overview of question to ask

  1. Is the public opinion important for tax planning and the company’s business objectives?
  2. What is the impact if due to lack of control measures the company is accepting (known or should have known) to be part of fraudulent activities
  3. Has the public opinion changed due to economic climate?
  4. What drives public opinion?
  5. What is the impact on the reputation of the indirect tax function if planning is implemented and becomes unforeseen public knowledge?
  6. How important is the reputation of the tax professional to establish company’s tax objectives such as tax controversy (‘enhanced relationships’ with tax authorities).

via GITM Forum: Indirect Tax And Managing Reputational Risks

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