Headline Verdana Bold Managing tax - Deloitte United States · ©2016. For information, contact...

Headline Verdana BoldManaging taxBalancing current challenge with future promiseThe EYE, Amsterdam, 30 November - 1 December 2016

Setting, communicating

and living by your tax strategy

Mark Kennedy, Deloitte UKMarco van der Meer, Deloitte Netherlands

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Tax strategy –setting it,

communicating it and delivering it

‘A strategy for the business (not the function) and to live by (not forget) …’

©2016. For information, contact Deloitte Touche Tohmatsu Limited.

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Contents

Responding to pressure 5

Regulatory update 6

Setting your tax strategy 8

Communicating your tax strategy 11

Living by your tax strategy 14

Bringing it all together 16


5

Combining forces

Responding to pressure

Tax is now a strategic concern

• Unilateral and multi-lateral legislative change – Base Erosion and Profit Shifting (BEPS)/Global Tax Reset

• Effective tax rate (ETR) and cash tax impact uncertain

• Broader stakeholder focus

Regulators are more demanding

• Transparency and reporting requirements

• Expectation of Board engagement and/ or oversight

• Focus on controls and systems

Organisations are transforming

• Revisiting commercial strategies• Transformation of finance and

broader supporting functions• Changes in underlying financial

and other systems and application of new technologies


6

The global tax reset

Regulatory update

Financing and treasury

• Hybrids and interest deductions

Centralisation of intellectual property (IP)

• Trademark/IP company

• Centralisation of professional expertise leads to stronger businesses and greater profitability

Supply chain• Value and functions

• Shared service centres

Transfer pricing (TP)

methodology

• Arm’s length moving towards profit split and rewarding value add

• Value of capital provider challenged

TP Documentation and CbC

Reporting

• Country-by-country (CbC) reporting

• Master and Local File

• Compliance cost/systems

European Commission –

State Aid

• Analyse potential implications based on existing rulings in the industry

• Discuss implications of company-specific rulings with Company counsel

ETRimpact

Businessimpact

Risk profile


7

Rise of tax transparency

Regulatory update

Rise in voluntary disclosures

Broader transparency requirements, e.g. UK,

Australia, Denmark

Industry targeted transparency

requirements, e.g., extractives, banks

Public country-by-country reporting,

considered by the EU, UK

Focus from financial reporting regulators, e.g., the UK Financial

Reporting Council (FRC)

Demands of investment community –

accounting and Environmental and Social Governance (ESG) specialists


8

Tax strategy –setting it,

communicating it and delivering it

What is a tax strategy? How do you define your goals…?


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Understanding the impact

Setting your tax strategy

• Evaluate options to mitigate impact of changes, risks

• Model target ETR

• Use findings to get buy in from key stakeholders to plans, resource needs

• Agree a plan of action and execute


10

Balancing stakeholder needs and sensitivities

Setting your tax strategyIn

tern

al

Sensitivities

Exte

rn

al

HMRC

Investors

Information confidentiality

Legal and risk

Internal audit

Tax team

Group executive board

Risk

Local board

Legal compliance

Value and efficiency

Reputation

Audit committee

Regulators

Clients

IT department

Operational restrictions

Staff

Cost of compliance

CFO

HRMLocal & Group

finance

Tax Authorities

Suppliers

Media & publications (e.g. tax transparency)

Non-profit organisations (e.g. Oxfam)

OECD


11

A joined up message

Communicating your tax strategy

• Reassess tax communications strategy

• Ensure meet IAS12 (or other) reporting requirements

• Consider making additional disclosures to meet stakeholder needs

• Implement communications plan across external channels

• Ensure consistency over time and measure impact


12

Requires an organisational response


Exte

rnal

In

tern

al

Investors, lenders, customers, employees, tax authorities, wider society

Board, CFO, Audit Committee, Risk

Heads of Divisional Finance, Group Tax, HR, Shared Service Centre(SSC)

Group Tax, HR,SSC teams

Internal Audit

Tax reporting – effective and consistent reporting of taxes, including UK tax strategy, financial reporting and other public disclosure

Tax strategy and governance – tax strategy, tax policy, tax committee, protocols for key decision-making, monitoring existing risk profile and appetite for new risk

Tax risk management – control framework for existingtax risks; process for identifying and reporting new risks

Tax management – people, processes and systemsto support effective business advice and compliance

Tax assurance – objective assessment of the effectiveness of design and operation of tax controls


13

Example dashboard - report your contribution to the overall corporate strategy



14

Making key decisions - judgements

Living by your tax strategy

• Tax decisions on judgemental matters are expected to be escalated to a suitable layer of management

• These decisions need not only consider the law but also the group’s own tax policy, industry standards and external opinion

• Leading groups have developed criteria for assessing situations where there are choices

• The criteria and thresholds are tested against real-life scenarios

• Legacy positions are considered

• The guidance is used to drive appropriate escalation/reporting to senior management

• This enables appropriate, consistent decision-making


15

Making key decisions - operations

Living by your tax strategy

• Senior management of large organisations are increasingly expected to actively oversee the management of taxes

• See new requirements in Germany, Ireland, Spain and the UK

• Tax authorities in many countries, e.g. Australia, Canada, the Netherlands are following OECD guidance which encourages adopting a risk-based approach, often overseen by senior management

• A key aspect of these rules is having processes which enable risks to be escalated to senior management to ensure resources are appropriately applied


16

Thriving under pressure

Bringing it all together

Understand the impact of external forces on your business

1. Review your tax strategy, striking the right balance for your stakeholders

2. Develop a joined-up approach to communication

3. Ensure that you have the organisational backing to deliver the strategy

4. Make key judgemental and operational decisions in the right way

5. Thrive under pressure


17

Faculty

Mark Kennedy, Deloitte UK

Partner

Marco van der Meer, Deloitte Netherlands

Senior Manager

[email protected]

+44 20 7007 3832

[email protected]

+31 (0) 882883273


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© 2016. For information, contact Deloitte Touche Tohmatsu Limited.

Headline Verdana Bold Managing tax - Deloitte United States · ©2016. For information, contact...

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