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!
VISION TAX
STRATEGY
TAX POLICY AND STANDARDS OF CONDUCT
GOVERNANCE
& RACI
RISK
MANAGEMENT
MONITORING
& REVIEW
TOOLS
TECHNOLOGY
pOLICIES & PROCEDURES
PEOPLE
RESOURCES/ADVISERS
A Vision for Tax through the development of Tax Strategy and Tax Policy:
The Tax Control Framework (‘TCF’) roadmap provides the framework for the effective management of tax within an organisation. It is a path that all our clients follow, with the key starting point being the development of a clearly articulated Tax Strategy and Tax Policy that should be communicated to key stakeholders.
To develop a successful tax control and operating framework, it is first important to articulate your tax vision – determining where you are now, and where you want to be in the future. We define a Tax Strategy as providing the vision for your current and future operations; the 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 ‘Tax Handbook’ for your TCF. Many of our clients are also seeking to publish their Tax Strategy and Global Tax footprint as part of their ESG and Responsible Tax agenda.
GET IN TOUCH TO DISCUSS MORE
TAX CONTROL FRAMEWORK ROADMAP
1
2
3
x
4
5
7
GET IN TOUCH TO DISCUSS MORE
Governance:
Strong tax governance is all about effective management of tax risk in the business, setting up tax escalation mechanisms and defining clear tax accountabilities and responsibilities (eg using a RACI matrix).
For larger organisations, questions will also include how you develop your tax organisational model in terms of a centralised versus decentralised model.
x
6
GET IN TOUCH TO DISCUSS MORE
Policies and procedures:
Clarity to your tax team over their everyday responsibilities is important. Many of our clients have asked us to develop tax control policies and procedures including process maps and flow charts related to specific and high-risk processes such as VAT compliance and Transfer Pricing.
For the latter, we have provided assurance to our clients over their Transfer Pricing processes to provide evidence that they have a robust transfer pricing charging framework, and clarity over their operational charging processes that can be shared with tax authorities and other stakeholders as needed.
x
GET IN TOUCH TO DISCUSS MORE
Risk Management:
Effective tax risk management does not have to be complex. We believe a simple, but structured approach to managing tax risk can demonstrably improve an organisation’s identification, assessment and management of tax risk and create an environment of ‘no surprises’ around the delivery of tax on a global basis. Our approach has three elements: (1) Carrying out a global tax risk review to identify any immediate risk areas (‘burning platforms’) and to undertake an assessment of the strength of your tax risk and control framework. (2) Remediation of identified high risk areas. From our experience of other global risk reviews, this typically includes specific tax areas such as Transfer Pricing, contractor status, mobile employees, commercial substance of corporate structure as well as areas where tax optimisation exist such as R&D and tax depreciation. (3) Building blocks to strengthening your tax risk and control framework. Depending on the results of the above, this may involve the implementation of processes, tools and technologies to improve your tax risk and control framework across the business. Contact us for more information about our online risk assessment tools.
x
GET IN TOUCH TO DISCUSS MORE
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. Develop a third line of defence internal control monitoring programme over higher risk tax processes.
x
GET IN TOUCH TO DISCUSS MORE
Technology:
All effective Tax Control Frameworks are supported by the effective use of technology. Our work always considers opportunities for the enhanced use of technology, data analytics, and tax optimisation.
Read more about the role of Tax Technology in the planning and implementation of effective tax processes in the US and UK.
x