Tax Corporate Governance (TCG) from a taxpayer’s perspective

‘Tax Corporate Governance (TCG) is nice to have, however we do not have the resources and capacity to look into this.’ This was the general response from most companies when we spoke to them about four years ago, well before the commencement of the first phase of the TCG programme. Cooperative compliance was another catchphrase used sporadically in discussions and much less so, in relation to tax.

However, this has changed with the push from the ‘B Team’ (set up in 2013, comprising leading multinational companies), sustainability indices (e.g. FTSE4Good, GRI 207) and stakeholders requiring more information about how companies are managing their tax risk and compliance. The ‘B Team’ has since grown to 27 companies (as at early 2024) that endorse ‘The B Team Tax principles’ (launched in 2018). These principles  provide companies guidance on how to shape their own journeys with transparency and integrity. In essence, this group of taxpayers believe that tax is fundamental to their social impact and licence to operate. Therefore, it is important that a responsible approach is adopted for tax risk and compliance.

Whilst TCG is still a voluntary programme, we note that many companies are looking into this initiative. This has been on the agenda of many for various reasons as discussed in our earlier blog. TCG is key to effective management of data through good controls, governance and awareness of tax risk and compliance within an organisation. Based on our  observations in helping the first movers assess their current position, the following practices can be considered. 

Walking the journey in a collaborative fashion has enabled mutual understanding of requirements by the IRB and the taxpayer. These activities and interactions have resulted in open lines of communication to enhance trust and transparency particularly, during the review period by the IRB, after the submission and acceptance of the application.

Most companies have SOP and tax strategies in place that may adequately meet the IRB’s requirements. However, it is equally as important to ensure the efficacy of these documents, specifically how strategies, policies and SOP are operationalised?

During the site visit by the IRB, it is important to have the following in place:  

1. Pre agree which processes the IRB would like to test for efficiencies to prepare for the visit.

2. All parties in the selected tax processes are present to walk through what they do, to articulate their roles and responsibilities.

3. Ensure that documents (e.g., tax risk register, process flows/SOP, remediation summaries, not exhaustive) and tools (where applicable) are available and shared or walked through to enable the IRB to determine how effective these are  in the processes (where applicable).

Once certified, you will have a dedicated officer that will be able to work in tandem with you on future changes to business arrangements and requirements. Therefore, it is important for the IRB officer to understand the business and how tax risk and compliance are being managed. Even though details on the renewal process have not yet been defined in the guidelines, it would be helpful for regular checkpoints on SOP and processes with parties involved to proactively manage tax matters and obligations.

Evidently, trust and transparency are imperatives with the information currently available to stakeholders to make decisions. Reimagine the possible – whatever the drivers are for your organisation to participate. Consider some of the ‘carrots’ available once certified:

1. A dedicated IRB officer to manage your tax compliance with no tax audits for three years and accelerated tax refunds (where applicable).

2. Deepening trust amongst your stakeholders and enhancing your reputation within society on the responsible actions taken to manage tax risk and compliance.

3. Alignment of business processes, policies enhancing the ecosystem for effective management of tax risk and compliance, leading to  efficiencies and more accurate data available for tax reporting and value creation for the business.

Open dialogue with stakeholders including the IRB after assessing your maturity level (as outlined in our earlier blog) will enable a more accurate game plan to be developed. Whilst it is not a race, it would be effective to continue with the momentum. For example, after your e-invoicing journey, leverage the activities and review the processes and SOP in place. 

You can start by considering the following, after which let’s have a chat.

Congratulations to the pioneer companies that have successfully participated and been awarded the status (19 June 2024). We will delve into observations and considerations from the IRB’s perspective in our next blog. 

Did you find this blog helpful? Yes | No