Tax Questions for Directors to Consider
The focus on tax has hugely intensified in the past number of years with a swathe of global tax changes coming from the EU and OECD. Tax is now recognised as a key risk and compliance issue in the boardroom and company boards must be able to formulate and communicate their tax strategy to all stakeholders.
Directors must be confident and capable of asking the right questions in relation to their organisation’s tax strategy and to constructively challenge the executive with regard to the approach taken.
Directors should consider the following:
- Is the agreed overall tax strategy aligned with business goals?
- Is the organisation’s tax risk appetite clearly defined?
- Is the tax strategy underpinned by:
- A tax risk management framework?
- A tax control framework to consider that all taxes are paid and filed on time in all jurisdictions and that tax liabilities are properly provided for?
- Is the audit / risk committee properly focused on tax?
- Does the organisation have a tax communications strategy for both external stakeholders and staff?
- Is the tax function adequately resourced with the right expertise?
- Is tax included in the induction programme for new board members?
- Is the organisation BEPS ready?
- Where are the value drivers located – people, risks, substance?
- Where are the global profits located?
- Do these match?
- How much tax has been paid?
- Tax disputes
- Are there any major areas of disagreement with a tax authority?
- Is the board satisfied with the way these disputes are being handled?
- Have potential tax liabilities been adequately provided for?
- Has the board considered the reputational issues?
- Does the organisation regularly review what competitors and peers are doing in relation to tax?
With an increasing number of issues coming under the board’s remit, directors are expected to have sufficient knowledge and understanding across a wide range of areas, in addition to their legal responsibilities and governance duties, and as such, to ask the right questions and interrogate their organisation’s strategies.
Our thanks to the Irish Tax Institute for providing these key tax questions for directors following a joint event held in April 2016 on the subject of tax in the boardroom. To find out more about the Irish Tax Institute visit www.taxinstitute.ie.