TAX CONTROL FRAMEWORK
The OECD defines a Tax Control Framework simply as ‘the part of the system of internal control that assures the accuracy and completeness of the tax returns and disclosures’.
Increasingly, tax authorities and regulators are expecting businesses to have considered this definition and be able to demonstrate the steps they have undertaken to operationalise their own Tax Control Frameworks.
The OECD states that there are six building blocks which underpin good practice in a Tax Control Framework. These can be summarised as follows:
An established Tax Strategy
A Tax Policy that sets out expected standards of conduct in how you want tax managed in the business
Governance as it supports tax is documented, including assigning accountabilities and responsibilities for the management of tax
Tax procedures that support the Tax Strategy and Tax Policy are in place and embedded in everyday operations
An effective Tax Risk Management framework
Testing is performed and assurance is provided.
START
Finish
PIT STOP:
ZERO MEASUREMENTS
AND TCF ASSESSMENT
ASSURANCE THAT YOUR GLOBAL TAX:
OPERATIONS ARE EFFECTIVE AND THAT THERE IS A CULTURE OF NO SURPRISES OVER TAX RISK
GO
AGAIN!
A Vision for Tax and a Tax Strategy
TAX POLICY
GOVERNANCE
RISK
MANAGEMENT
MONITORING
& REVIEW
TOOLS
TECHNOLOGY
POLICIES & PROCEDURES
PEOPLE
RESOURCES/ADVISERS
A Vision for Tax and a Tax Strategy:
The key starting point is the development of a clearly articulated Tax Strategy. It can be useful to think of your Tax Strategy as providing your tax vision for your current and future operations.
Our ‘Developing your Tax Control Framework’ publication provides more information.
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TAX CONTROL FRAMEWORK ROADMAP
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Governance
Strong tax governance is all about setting up tax escalation mechanisms and defining clear tax accountabilities and responsibilities using a RACI matrix and, for larger organisations developing a tax organisational model.
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Policies and procedures
These define and provide clarity over everyday accountabilities and responsibilities. Process maps, flow charts and other policy documents will all be key elements.
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Risk Management
Identifying and mitigating your tax risks to build a ‘no surprises’ environment around the delivery of tax on a global basis.
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Monitoring and Review
Develop practical reporting tools to provide senior management with confidence that tax compliance requirements and tax risks are adequately tracked and actioned.
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Technology
Consider opportunities to use of tax technology and data analytics to improve the effectiveness and robustness of the framework.
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Tax Policy:
Your Tax Policy is more detailed and will set out expected standards of conduct in how tax is carried out in your business. In essence, it is your ‘Handbook’ for your Tax Control Framework. Your Tax Policy needs to be communicated to key stakeholders.
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