Afleveringen
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What is the intersection of tax and compliance? Why does a Chief Compliance Officer (CCO) or compliance professional need to sit down with the corporate head of tax? How does a corporate tax function fit into a best practices compliance program? It turns out there is quite a bit a compliance professional can learn from a tax professional. Moreover, there are many aspects of tax which should be considered by a CCO and compliance professional from an overall risk management perspective. Unfortunately, these questions are rarely explored in the compliance community. In this episode, we explore the unexplored topic of the role of tax in a corporate ESG program.
How Tax and ESG Intersect
Tracy tells Tom, “There are external forces pulling tax into the ‘S’ and ‘G’ of ESG.” In the social sector, different jurisdictions have different tax rates and laws, and as companies begin to operate in a tax-efficient manner, their activities will gravitate towards lower tax regimes. Tracy adds, “You’ve got forces trying to push the concept of ‘fair share’ rather than compliance with tax laws of different jurisdictions.” Governance-wise, it’s becoming more common for companies to be required to talk about their compliance tax audits.
The Role of Tax in a Company
With the growing pressures on ESG transparency, there’s a push to standardize reporting and scorecarding of companies based on their tax transparency. This would include things like the reporting of an organization’s effective tax rate.
Tax and ESG in Multinational Organizations
Institutional investors play a major role in impacting the activities of a multinational company. When making investment decisions, these entities heavily incorporate ESG scorecards with tax transparency, further emphasizing the need for a relationship between the two sectors.
Resources
Tracy Howell | Email | LinkedIn -
What is the intersection of tax and compliance? Why does a Chief Compliance Officer (CCO) or compliance professional need to sit down with the corporate head of tax? How does a corporate tax function fit into a best practices compliance program? It turns out there is quite a bit a compliance professional can learn from a tax professional. Moreover, there are many aspects of tax which should be considered by a CCO and compliance professional from an overall risk management perspective. Unfortunately, these questions are rarely explored in the compliance community. In this episode, we explore the intersection of tax and Supply Chain.
How Tax Can Help Supply Chain
Supply chain in a traditional sense focuses on the acquisition of goods, in particular the quality, cost, and delivery. There can be a substantial tax component in each of those steps to help companies attain goods at the lowest possible cost. Consequently, if supply chain does not have a relationship with tax, it can result in additional surprise costs being attached to goods. Data beyond the cost of goods, material, and service can be used to model and predict the additional tax burden so that better procurement decisions can be made.
Mitigating the Risk of Mission Creep
Establishing a connection between tax and supply chain in an organization is good, but the relationship needs to be kept fresh for a positive impact. In a company, people may be focused on so many different things that they forget to interact. Creative people tend to expand their roles and look for goods and services in different locations, which can be the cause of a mission creep. Hence, having constant close interaction between supply chain and tax allows for changes in functionality to be documented and implemented into the organizational framework.
Elements of a Tax-Efficient Supply Chain
Tom and Tracy discuss the elements of a tax-efficient supply chain. This includes:
Examination of the entire scope of what’s being manufactured and sold to allow the creation of tax opportunities to bring value-based on special purpose entities.
Coordination of transactions in a supply chain with transfer pricing.
Compliance with tax laws and regulations.
Documentation of the process.
Resources
Tracy Howell | Email | LinkedIn -
Zijn er afleveringen die ontbreken?
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What is the intersection of tax and compliance? Why does a Chief Compliance Officer (CCO) or compliance professional need to sit down with the corporate head of tax? How does a corporate tax function fit into a best practices compliance program? It turns out there is quite a bit a compliance professional can learn from a tax professional. Moreover, there are many aspects of tax which should be considered by a CCO and compliance professional from an overall risk management perspective. Unfortunately, these questions are rarely explored in the compliance community. In this episode, explore the question of why tax needs a seat at the table.
Tax and the Table
The table refers to the front end of when an organization is trying to define what it wants to do, where it wants to do it, and how it’s going to perform. A corporation’s ultimate objective is to generate net income or distributable profit, something tax professionals are well-suited to assist with because they are experts in damage control and risk mitigation. Tracy points out, “Tax can provide an umbrella to achieve corporate objectives if they’re involved in the front end.”
Tax’s Relationship with Other Stakeholders
In a company, a functional lead will often pose the question: ‘Why do we need tax here?’ According to Tracy, “A good tax guy has to be proactive and provide examples to get the tax men at the table.”
Educating Corporate Functions Outside of Tax
Tracy’s advice is to build a relationship with the functional experts, and “create the situation where you’re a trusted business advisor”. He recommends one-on-one interactions above all. However, it is important to remember that in a global organization, the outcome may not always be successful. For this approach to yield positive results, he comments, “there has to be some buy-in, compliance, and a willingness to talk tax.”
Resources
Tracy Howell | Email | LinkedIn -
What is the intersection of tax and compliance? Why does a Chief Compliance Officer (CCO) or compliance professional need to sit down with the corporate head of tax? How does a corporate tax function fit into a best practices compliance program? It turns out there is quite a bit a compliance professional can learn from a tax professional. Moreover, there are many aspects of tax which should be considered by a CCO and compliance professional from an overall risk management perspective. Unfortunately, these questions are rarely explored in the compliance community. In this episode, we transfer pricing.
The Concept of Transfer Pricing
Transfer pricing encompasses the methodologies required by tax code to price transactions between affiliated companies. Devising an arm's length rate for comparable transactions between comparable entities is more art than science. As far as compliance is involved, Tracy believes that, “If you’re a compliance officer that can say anything more than just the words, ‘transfer pricing,’ then you are, indeed, an FOT (friend of tax).”
Parties Involved in Transfer Pricing
Governments (taxing jurisdictions) tend to be involved with different regimes for selling and buying. Third party organizations that are involved currently only consist of the OECD (Organization for Economic Cooperation and Development), who push standard transfer pricing laws and regulations throughout the world.
The objective of the governments is to get their fair share, and they do so by trying to obtain the maximum multi-jurisdictional transaction profit. Consequently, the OECD attempts to provide guidance on what constitutes a fair share. “What’s fair is just somebody’s opinion,” Tracy tells Tom.
Developing a Transfer Pricing Strategy
As a multinational corporation, it is crucial to set transfer pricing policies and business practices at the beginning. This involves identifying the appropriate methodology that will be used to price the transactions between affiliates. Documenting this process of analysis and conclusion helps to adopt a suitable transfer pricing methodology. In summary: perform analysis, document analysis, then adopt the findings in future transactions.
Tracy poses the question, “How often have you seen a company that’s got the policies and procedures, but somebody’s not following them?” Claiming to have global policies for all multinational intercompany transactions, and then failing to follow them leads to an extreme loss of credibility - this is why it is important to comply with local documentary requirements, “You’ve got to follow the laws, even if they’re a little bit different.”
Resources
Tracy Howell | Email | LinkedIn -
What is the intersection of tax and compliance? Why does a Chief Compliance Officer (CCO) or compliance professional need to sit down with the corporate head of tax? How does a corporate tax function fit into a best practices compliance program? It turns out there is quite a bit a compliance professional can learn from a tax professional. Moreover, there are many aspects of tax which should be considered by a CCO and compliance professional from an overall risk management perspective. Unfortunately, these questions are rarely explored in the compliance community. In this inaugural episode, we consider the following topics.
Why Should Compliance and Tax Interact?
All organizations have an enterprise risk management (ERM) system. One risk common to multinational companies especially is corporate tax risk; and yet, it tends to remain under the radar. While tax professionals are usually very good at identifying and mitigating tax risk, if there is no close interaction between compliance and tax professionals, the risks are elevated.
Sophistication in Taxing Jurisdictions
Most jurisdictions have a tax code, but street rules tend to also be in play. “You have to establish very early on that you don’t pay bribes,” Tracy advises. The results of following the law are more expensive, but it pales in comparison to the cost of putting your company at risk.
Resources
Tracy Howell | Email | LinkedIn
