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Transcript of Tax Technology Systems. 2 © 2011 HALLIBURTON. ALL RIGHTS RESERVED. The Need For Change Inadequate...
Tax Technology Systems
2 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
The Need For Change
Inadequate for basic tax functions: – Provision system (TIS) is unsupported– Compliance system not fully implemented– Provision/Compliance reporting systems are not integrated – Poor functionality (FIN48, FIN18, TBBS do not exist in current systems)
Do not support Tax Departments Objectives: – More tax resources allocated to tax planning– Single tax system platform supporting:
• Global provision and U.S. compliance integration• Tax planning and tax controversy processes• Visibility of global tax attributes to the home office
– Possibility of foreign tax compliance in a future state– Potential for integration of transactional taxes
• VAT, Sales & Use, Property
– Configuration to allow finance ERP systems (SAP, HFM, and Hyperion Planning) to better support tax
Current Systems …
3 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Tax Accounting:
Foreign Provision
Fin48/UTP
E&P Pools
Domestic Deferred
Domestic Provision
Tax Planning
Compliance:
Dom., Int’l, State
VAT
Sales & Use
Property
Transfer Pricing
Excise
Audit/Controversy
Tax Systems Vision – Single Platform
2011 2012 2013
TIS DI
Access
BNA BNA BNA
CorpTax
OneSource
Implementation
Vertex Vertex Vertex
Access Access Access
TDW TDW TDW
TalismanTalisman
OneSource
Implementation
CorpTax
OneSource
(Capability)
4 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Improve transparency, quality and speed by reforming processes and integrating technology platforms
► Progress to improve income tax reporting will be slowed since current technology cannot support desired improvement
► Issues will be compounded with continued growth
► Continued risk in tax reporting errors, missed deduction, penalties and interest
► Challenged in the ability to manage and communicate tax position in real time
► Quality suffers due to sub-optimal use of people, process and technology
► On-going retention issues and ineffective support
► Key Issues and Challenges
► Data and technology gaps exist at each layer of tax calculations which require manual workarounds and take time away from value added work
► Manual processes are required to interface data across reporting lines and within reporting functions creating challenges to high quality review
► Provision and compliance integration is difficult creating rework and risk of error
► Heavy reliance on excel worksheets to support tax calculations results in increase risk of errors, duplication of effort
► Significant manual workarounds result in inability to report and communicate real time results
► Teams are looking at data a different levels and in different time periods creating increased risk of error
► Current manual processes require brute force efforts on a recurring quarterly basis
► High cost of developing and maintaining proprietary tools
Current situation Potential risks of inaction or delayed action
► Reduced reconciliations through substantial improvement in integration
► Cost savings through reductions in manual processes
► Significant reduction in income tax reporting cycle time requirements
► Higher visibility into tax processes and results at each “layer” increasing awareness of issues and related impacts
► Increased accuracy and greater visibility of information through automation
► Reduction in low value added manual activities will improve retention
► Software maintenance costs decrease by changing to 3rd party “off the shelf” tools
Key benefits provided by defined program
5 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Technology & ProcessDesired Outcomes & Benefits
Strategy Performance
► Provide a true tax provision calc at lowest common level (legal entity and business unit)
► Complete calculation within hours of data availability
► Re-use data in cumulative-build PEER process (integrated Provisions, Estimates, Extensions and Returns)
► Storage of data and work product for future audit
► Lower costs
► Shorten cycle times for recovering reports/data
► Automate book/tax differences
► Automate tax planning modeling
► Redirect tax resources to planning and analysis
► Collaboration with service providers and internally
► Ability to access and maintain data
6 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Data QualityDesired Outcomes & Benefits
Strategy Performance
► Create a centralized source for data that supports both current tax planning and reporting as well as future audit defense
► Manage data as a core asset of tax operations
► Create processes for tax and accounting functions to establish data standards
► Maintain tight control over material tax items/related accounts that impact tax
► Increase accuracy, and reduce reconciliations
► Single point for storage/retrieval of data
► Ability to manage audit risks
► Increase tax savings through planning
► Transparency of data—clear audit trail
► Automated system controls
► Improve validation at earlier points
► Standardize rules and activities having tax impact
► Accountability inside and outside Tax for quality of data
7 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Software Evaluation Process Conducted including all tax disciplines Involved evaluation of two leading vendors
CorpTax OneSource
CompanyMLM Information Services, LLC.
(Private Equity Owned)
Thomson ReutersNYSE:TRI$13B RevenuePresence in 100 countries
Strategy • Built on Compliance Core • Single Database
• Built by acquiring Best–In-Class Tax Systems
• Integrate multiple platforms
Software Strengths
• Compliance
• Provision• Data Management (supports
Process Improvement)• Foreign Support
OneSource Is A Better Fit For Halliburton
8 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
How OneSource Supports Tax Direction Sustained Process Improvements:
– Flexible data feeds & adjustment automation enable working with F&A to improve upstream data feeds
– Workflow allows us to build standard processes into software, thereby mitigating risk of manual manipulation
– Improved functionality means fewer manual workarounds and reformatting of reports to meet custom needs
– Single platform enables staff to move between provision & compliance
Improved Data Management:– Enables automation– More flexible data feeds– Higher level of detail available– Less manual process maintenance
Enhanced Reporting Capability:– Uncertain Tax Position Calculations (FIN 48)– Forecasting Functionality (FIN18)– Global Provision – visibility around the world, without manual effort
Allows Tax To Focus On Higher Value-Added Activities
9 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Implementation: Ernst & Young First-hand knowledge of Halliburton’s business and systems
– Project Leads are familiar with data warehouse/ODS, SAP, Hyperion, TIS, Talisman and other unique Halliburton tools understanding how each must integrate across tax (gaining efficiencies through minimal time spent “getting up to speed”)
– They have worked with Halliburton tax in functions such as provision, compliance, transfer pricing, apportionment and other areas
Global Tax Performance Advisory Team – EY’s Tax Performance Advisory (TPA) team is organized globally and focuses on
people, process and technology at large corporate tax departments. • Full time, dedicated TPA resources number above 60 in the U.S.• Approximately 20 in Europe/Middle East/India/Africa (EMEIA) and • Approximately 10 in Asia/Pacific • TPA services in Brazil, Mexico and a Latin America Bus. Center in Miami
Providing objective advice – EY provides objectivity to point out the vision, process and people changes that
must occur to reach project goals. Software vendors rarely have the experience outside their tools to provide this type of objective advice.
10 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Implementation: Ernst & Young (cont….) Tax accounting technical experience
– EY has consulted with the CAO and CFO of Halliburton on technical accounting issues and brings both the accounting technical, in addition to the implementation experience needed.
Considering the full picture– EY has extensive experience in teaming with all groups that are critical to these projects to
obtain the right input and insights from multiple groups within Halliburton (Accounting, Tax, IT, etc) and other groups (external auditor).
Working with the external auditor – EY standard methodology includes external auditor at key milestones evaluating changes to
the controls, testing plan and approach to provision calculations.
Partnering with software developer– Ernst & Young is formalizing an agreement with ThomsonReuters to achieve global
implementer status, meaning teams are trained consistently in the same exacting standards ThomsonReuters requires, not just domestically, but globally.
– Ernst & Young is the only service firm with one practice (TPA) that is organized globally. – Ernst & Young will team with ThomsonReuters, as appropriate, to provide best-practice
solutions .
11 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Tax Systems Team – Internal Resourcing
Mark Sumlin – Project Lead Daniel Garcia – Project Manager Gary Sella – Process Manager Kevin Shea – Data Manager Sara Sykes – Domestic Provision/Consolidation Darrell Simmons – Foreign Provision Randy Miller – Compliance Lead Randy Phillips – Federal Compliance Noman Mogul – International Compliance Lyle Maddox – State Compliance
12 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Next Steps – Obtain Internal Approvals
Subsequent to approvals…– Coordinate with stakeholders:
• Procurement & Legal• Information Technology• Internal Audit• Finance and Accounting
Define Configuration:• Conduct configuration workshop with Ernst & Young
and ThomsonReuters• Finalize detailed workplan and roles
Acquire Software/Services• Begin Implementation
Data Management Group
June 14, 2011
14 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Team Members Kevin Shea Randy Phillips Benjamin Huang Elaine Tang Daniel Garcia Jim Anderson Gary Sella Sita Chowdhury Nancy Vu Stacy Hill Nekeya Evans Sharon Streiffert Noman Mogul Steve Pipkin
15 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
How We Serve / Who We Serve
Combine Technology and Function SMEs as a group Pool the resource and knowledge, Identify data issues and provide
efficient solutions Assisting in areas such as:
– Tax Accounting• Streamline data process and support reporting obligations
– Tax Planning• Provide financial reporting assistance for IP structuring
– Tax Compliance for supporting regulatory obligation• Assist to optimize data, system, and processes
– Tax Controversy for audit support substantiation• Reports to collect audit defense R&D
– Tax System Implementation• Increase automation on data sources and processes• Assist system Integration
16 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Automate FIT Data Process
Business Owner: Darrell Simmons Project Lead: Nancy Vu
Purpose: To enhance and increase process efficiency for foreign provision tool - FIT
Area/Item for Improvement Time Est
Create dual FIT templates functionality Done
Import SAP Book balances Done
Import TBBS adjustments 10/31/11
17 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Research & Development Process
Business Owner: Janet Wilson Project Lead: Nancy Vu
Purpose: To provide documentation, organization, and transparency for R&D
Area/Item for Improvement Time Est
Streamline collection of raw project data TBD
Organize supporting documents TBD
Create progress checklist TBD
18 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Financial Reports for IP Analysis
Business Owner: Mark Sumlin Project Lead: Benjamin Huang
Purpose: Provide financial reports to support IP analysis project
Area/Item for Improvement TimeEst
Reconciled Mgnt book (PSL) w/ Legal book Done
US vs. Foreign by Cocode by PSL TBD
Reconciled reports to support IP model TBD
Direct Sale by PSL and Geography TBD
Tax Forecast by Cocode by PSL TBD
19 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Withholding Tax Validation
Business Owner: Steve Pipkin Project Lead: Benjamin Huang
Purpose: To increase foreign tax credit accuracy from W/H tax receipts
Area/Item for Improvement TimeEst
Foreign Tax Accrual report Done
Prior Year True-up Comparison Done
Analysis of Withholding Tax Payments Done
Analysis of Changes of Prior Year True-ups 11/30/11
Analysis of Changes in Assigned items 11/30/11
Analysis of Changes in Unassigned items
11/30/11
20 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
E & P Process
Business Owner: Steve Pipkin Project Lead: Elaine Tang
Purpose: To centralize and streamline E & P study and adjustment process
Area/Item for Improvement TimeEst
Centralize and Streamline E&P process 6/30/11
Provide E&P simulation (what-if) function 7/31/11
Develop consolidated E&P analysis reports 7/31/11
Automate annual average exchange rate 8/31/11
Data automation with Compliance app 9/30/11
21 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Global Operation Documents Management
Business Owner: Mark Purnell/Glenn Little Project Lead: Sharon Streiffert
Purpose: Provide critical documents to support F&A & Tax global operations
Area/Item for Improvement TimeEst
Inter-Company agreements 6/30/11
Transfer Pricing Global and Country Study 6/30/11
Expatriate Tax documents 6/30/11
Regional Tax Country documents 6/30/11
22 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Business Objects Reports
Business Owner: Randy Miller Project Lead: Daniel Garcia
Purpose: Upgrade Business Objects Platform & Migrate Current Inventory of Reports Into the New Environment
Area/Item for Improvement TimeEst
Upgrade Business Objects to XI 3.1 12/31/11
Analyze & Identify Opportunities For Efficiency Gains in Universes, Schemas, Queries & Reports.
03/31/12
23 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Indirect Tax Process & Technology
Business Owner: Kenny McCorquodale Project Lead: Daniel Garcia
Purpose: Initiate and successfully complete our short and mid term Sales, Use, Excise & Property Tax process & technology opportunities
Area/Item for Improvement TimeEst
New Excise Tax Reporting Database 12/31/11
Identify Existing SUT Technology Limitations 12/31/11
Upgrade Vertex Returns Database (SQL) 12/31/11
Explore Property Tax Compliance Packages 12/31/12
Explore SUT Automation Upgrades 12/31/12
Explore VAT Automation Upgrades 12/31/12
24 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Future Data Improvement Focus Areas
Controversy modules Section 199 Tax Forecast Pool SME Expertise Reduced Excel-based manual process Tax Planning Tracking module Entity or Stock basis
Tax Accounting Workgroup
Process Improvement Initiative
June 14, 2011
26 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Tax Accounting Workgroup
Team Members– Gary Sella– Darrell Simmons– Nancy Vu– Rose McNulty-Hurst– Lyle Maddox– Helen Griffiths– Dora Man– Eirik Kindingstad– Mark Sumlin– Randy Miller
27 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Finance Organization Vision and Values
Core Concept• Insight – using our financial expertise to provide Halliburton with the
intelligence and flexibility to respond to any opportunity• Quality, Efficiency and Control – consistent delivery of reliable
and timely financial information, analysis and properly executed transactions utilizing best-in-class, streamlined processes with a commitment to a strong control environment
• Employee Development and Recognition - retaining and attracting the highest-quality finance professionals
28 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Finance Performance Objectives
2010 & 2011 performance objectives relative to Quality, Efficiency and Control. – Drive Report Standardization – Ensure “one version of the truth” utilizing
Hyperion management reporting and implementing a standard project accounting application
– Promote Efficiencies – Leverage our applications to reduce manual processing and our business model to maximize output & identify areas for automation and drive reduction in manual processing
29 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Finance Performance Objectives
2011 performance objectives relative to Insight. – Forecast Accuracy – Monitor and help drive forecast accuracy for both
revenue, cost and contribution margins– System and Process Improvements- Plan and implement within budget
and timing constraints:• Streamline tax systems
30 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Team Objectives
Promote Efficiencies & Control– Automate routine, recurring manual processes– Decrease time and data manipulation required to compute the global tax
provision– Enhance ability to incorporate late accounting entries into the tax
provision processes– Expand time devoted to application of internal controls to the reporting
process– Utilize standardized processes to insure appropriate application of
governing technical guidance Forecast Accuracy
– Increase capability to accurately forecast and monitor effective tax rates globally
Employee Development and Recognition– Empower personnel to engage in more value added planning activities
31 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Obstacles
Systems that are not integrated Manual processes that are time consuming Compressed cycle time for reporting requirements Lack of analytical processes integrated into the calculations Multiple data sources that require reconciliation Inability to view global account reconciliations Timeliness of necessary information from the field Sufficiency and quality of data required
32 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Targeted Areas of Focus
TIS is outdated (unsupported) and fails to support provision requirements– Cannot generate balance sheet account adjustments– Cannot generate a FIN18 or FIN48 reporting pack
Provision data base (Access) used to compensate for TIS shortfalls gives rise to duplicate maintenance– No OCI or Stock Comp capability
Systems do not fully support SEC auditor requirements Major processes completed manually with little automation Existing systems lack flexibility to integrate with ERP systems
– TIS only accepts general ledger balances Poor visibility into near and long-term future
– Talisman (month lag) cannot generate the information needed for forecasting
Process for continuous training required Alignment of tax with the finance organization (data not aligned)
33 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Upstream Solutions
Adoption of HFM as single source of balances for tax provision and compliance purposes – Enhance the Return-to-Accrual process– Automate reconciliations of Pre-tax book income
• Provision IBT comes from HFM• Compliance IBT comes from SAP
Increase timeliness of data availability– The Data Warehouse cannot populate the information fast enough to be
useful to tax Integration of Hyperion Planning data directly into provision processes on a
real-time basis
34 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Systems Solutions
Obtain system tools compliant with IT and Internal Audit requirements Use single system platform to house and support global tax provision
activities that can be leveraged by compliance, controversy, and planning activities– Thompson Reuters OneSource
Provide for increased system configuration flexibility to capitalize on sub-balance data available from ERP systems
• Cost Center• Purchase Order• Document Type, etc…
Provide for increased system reporting flexibility to accommodate cross functional review without manual generation of reports
• FIN 18• FIN 48• Tax Basis Balance Sheet
35 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Automation of Manual Processes
Support analytical processes with SAP exception-based reports Use new systems to reduce number of manually prepared PBC schedules Establish adjustment rules based on sub-balance attributes to
accommodate automation of mixed use accounts: – Single reserve accounts containing temporary and permanent
transactions (mixed-use accounts) – Contra-balances embedded within asset/liability accounts (foreign
currency valuation) Use systems resources to support local country adjustments from GAAP
balances to statutory balances and automate local country tax adjustments
36 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
People and Training
Assignment of support responsibility to Tracy Howell to assist F&A field personnel and RTM’s
Completion and rollout of iLearn courses followed by continuous update Tighter integration with accounting functions to initiate knowledge sharing in
areas such as:– Joint venture accounting– Benefits accounting– Fixed asset accounting, etc…
Increase focus on GAAP (ASC 740) technical training for personnel holding tax provision roles
37 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Reporting Quality Assurance
Enhance scope of analytical reviews through efficiencies gained in preparation time at closing
Optimize ETR continuous monitoring Resolve provision impact of tax issues as they arise, minimizing the work
effort at quarter end Formalize continuous connectivity to finance so as to be aware of real time
issues impacting tax Incorporate use of provision reporting checklists to ensure appropriate inter-
and intra-period classification of balances
38 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Priorities and Timeline
Implement upstream data solutions in line with needs of system solution (beginning July, 2011 and ending June, 2012)
Support provision system implementation activities (beginning July, 2011 and ending June, 2012)
Address automation of manual processes (beginning July, 2011 through December, 2012)
Initiate people and training objectives (beginning July, 2011 and ongoing thereafter)
Undertake reporting quality assurance measures commensurate with supporting systems/processes availability (beginning July, 2011 and ongoing thereafter)
COMPLIANCE TEAM
June 14, 2011
40 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Team Members
Lisa Brown Annie Liou Kenny McCorquodale Noman Mogul Linda Perritt Randy Phillips Pam Smith Mike Thacker Jim Weber Tanya Weisinger Rob Wilson
41 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Why Review Compliance Processes?
Reduce Inefficiencies & Redundancies
Drive More Accurate Estimates
Accelerate Close-Outs
Accelerate Return Filing Dates
Maximize Use of Technology
Maximize Use of Skill Sets - Best Use of Personnel
42 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Overall Objective
Optimize Workflows, Resources and Technology
43 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Areas Initially Covered
US Domestic (40 Form 1120’s, 1 Consolidated Return)
US Partnership Reporting (2 1065’s, 12 8865’s)
US-International (155 Form 5471’s, 8858’s, 5713)
US-State / Local Income (432 – Returns, Est. Pmts, Extensions)
Indirect Tax (Sales / Use & VAT) – (3,637 US Filings Annually)
44 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Overview – What Have We Done To-Date
Collaborated w/ Tax Team Members At Large To:
– Discuss Issues / Opportunities– Evaluate Corp Tax vs. One Source– Regroup – Address Indirect Tax
45 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Data / Processes / Technology
Common Theme From Discussions:
– Data Sources – Fragmented Processes / Systems– Manual Effort
46 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Domestic Income Tax Issues / Opportunities
Forms Automation International Inclusions / Data
– Sub F Income– Section 78 Gross Up– Foreign Tax Credit– Foreign Source Income
Topside Entries Manual Tax Adjustment (process) Automation
– Hedging Contracts– Section 162(m) Limitations– Aircraft Usage– Entertainment Facilities– Dual Consolidated Losses– Section 199– Hybrid Interest and FX
47 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Domestic Income Tax Issues / Opportunities - Continued
Manual Tax Adjustment (data) Automation– Effect of Account Balance Transfers on Rules– Effect of Accounts w/ Mixed Use Timing Difference on Rules– Effect of Foreign Exchange Reval / Re-measure on Rules
Split Companies Estimate Automation in Compliance Software Tax Depreciation
– Bonus Depreciation Automation– New Acquisition Tax Books Population– Annualized Tax Depreciation in Period Data
Disclosure Automation
48 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
US International Issues / Opportunities
Further Automate Forms 1118, 5471, 8858 and 5713
- Set Up Auto Rules For E&P Adjustments
- Automate Foreign Sourcing (Tech Fees, Leasing,
Export Sales, etc.)
- Streamline 861 Processes (Interest
Expense Allocation, G&A, Stewardship, etc.)
- Automate Form 5471, Sch M Create “What-If” Planning Scenarios Drive Automated Calculations For Estimates Create Repository for E&P Studies Enhance Communication in Section 956 Process (Monitor
Debt Settlement Timeframe)
49 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
US State Issues / Opportunities
Maximize utilization of Compliance Software
Automate Transfer of Data Between Compliance Software and Excel
Calculate State Depreciation
50 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
US Partnership Rptg. Issues / Opportunities
Consider the Effect of “Process Changes” for Partnership Rptg.– Effect of Auto Adjustment Rules - Partnership Capital Account– Mapping for 1120 may vary from Mapping for 1065 / 8865
Create Separate “Capital Accounts” for Partnership Rptg.– Partnership Capital Account– Contributions– Distributions
Reconciliation of Inter-company Loans– Currently Netted– Need True Accounting of Total Liabilities
Mapping Opportunities to Achieve Single Source of GL Data. – Automate Process – Foreign Source Income / Deductions– Automate Process – Intercompany transactions
51 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Indirect Tax Issues / Opportunities
Reduce the Number of US Indirect Returns by 500 – Q3 Explore Legal Entity Impact (further reductions – returns and processes) –
Q4 Enhance Property Tax / Excise Tax Reporting
– New Excise Tax Reporting Database - Est. Completion - Q4– Standardize Property Tax Procedures - Est. Completion - Q4
Identify VAT Compliance Issues - Est. Completion - Q4– SAP Reporting Issues– Manual Processes– Documentation Issues
Identify Existing SUT Technology Limitations – Q4 Upgrade Vertex Returns (SQL) – Q4
52 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
In the Foreseeable Future…..
Manage Legacy Systems / Processes (i.e., TIS / Corp Tax, etc.)
Continue to Identify / Document / Address Opportunities– Outside the Technology Platform – Within the Technology Platform– With F&A
Develop Power Users within Each Compliance Area (Business Objects, Tax Data Warehouse, etc.)
Commence Further Discovery – Indirect Tax (including VAT)– Explore Property Tax Compliance Packages – 2012– Explore SUT Automation Upgrades - 2012– Explore VAT Automation Upgrades – 2012
FOREIGN TAX CREDIT DOCUMENTATION
Payments
Third Party Withholding
Interco. Withholding
Tax Returns
54 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
TEAM MEMBERS
Sheila Brooks Mitch Brown Helen Griffiths Tracy Howell Linda Landry Dora Man Steve Pipkin Janet Rudnicki Darrell Simmons Sara Sykes Nancy Vu Trina Yeh
55 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
ISSUE
FTC’s (Foreign Tax Credits) per the Federal Form 1118– 2007 $263M – 2008 $232M – 2009 $220M– 2010 $240M (Proposed)
10 Year Statute of Limitation Penalty under Section 6689 FIN 48
56 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
OBJECTIVE:
Verify that Current Business Policies and Practices Cover the Documentation / Substantiation Process
Review the FTC Documentation / Substantiation Process Identify Gaps in the Process Develop Process to Efficiently Account for FTC’s on a
Monthly / Quarterly Basis Develop Processes / Procedures to Efficiently Account
for and Substantiate Foreign Tax Receipts in a Timely Manner
57 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
FOREIGN TAX CREDIT DOCUMENTATION
Corporate Policy and Business Practices Tax Accounting Tax Compliance Tax Audit Talisman Training
58 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Corporate Policy and Business Practices
4-44041 Copies of Tax Receipts and Tax Returns
(Updated 10/28/2010)
4-44131 Non-U.S. Tax Filings – Corporate Income Tax
4-44150 Accounting for Withholding Tax on Intercompany Transactions
4-44136 Tax Audits by Non-U.S. Tax Authorities
4-44133 Approval of Non-U.S. Corporate Income Tax Payments
4-44129 Non-U.S. Income Tax Accruals
59 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
TAX ACCOUNTING
Foreign Tax Credit Life Cycle – Provision Accrual
• Current• FIN 48
– Return to Accrual True up– Amended Returns– Audit Adjustments– Carry Back to Prior Years– Carry Forward Balance
60 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Tax Compliance
Foreign Tax Credit per Federal Form 1118– 901 Direct Credit– 902 Indirect Credit
905 (c) Redetermination / Foreign Tax Adjustments that affect FTC’s
• Amended Return Required for Increases in US Tax Liability due to:
– Decrease in Foreign Tax Liability– Accrued Taxes Unpaid after Two Years
• Penalty (Section 6689)– 5% of the Tax Deficiency for Failure to Notify– Maximum Penalty 25%
61 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
IRS Tax Audit
Foreign Tax Credit Substantiation– Primary Evidence
• Translated Tax Returns• Translated Receipts for Each Tax Payment• Translated Tax Assessments
– Secondary Evidence• District Director may Accept
– Copies of Financial Instruments with evidence that tax was paid on behalf of the taxpayer
– Excerpts from taxpayers books and records or foreign law
– Ten Year Window for Substantiation
62 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
TALISMAN
TRR – Tax Return Reconciliation– Original Return– Amended Return– Audit Assessments
Withholding Tax Module– Third Party (Customer W/H Tax remains in A/R until
Receipts are Received)– Intercompany
• Domestic to Foreign• Foreign to Foreign
RTA / OPA Modules– (Return to Accrual / Out of Period Adjustments)
63 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Conclusion
Talisman Modules are Sufficient to Capture Foreign Tax Receipts / Documents
Additional Process Required to Capture Data for Prior Year Tax Expenses - Monthly / Quarterly:
• Adjust Current Year Tax Return• Eliminates Fire Drill Request• Support Amended Return Filing • Support IDR Requests• Supports the Planning Process
Review and Amend Record Retention Schedule to Confirm Tax Receipts are Addressed
Develop Process to Release 3rd Party WHT from A/R
64 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
CONCLUSION CONT’D
Additional Training Required– Develop an I Learn Course Specifically Related to the
Foreign Tax Credit Substantiation Process • Reviewed and Updated Annually by:
– Tax Accounting– Tax Compliance
• Annual Certification Required – Finance & Administration– Tax Accounting and Compliance
TEAM CONTROVERSY
June 14, 2011
66 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Team Members
Janet Rudnicki Stephen Heeler Sara Sykes Norma Allen Dinorah Gonzalez Nikki McClanahan Glenn Little Tracy Howell
67 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Why Coordinate Global Tax Controversy
Mitigate worldwide tax liability (lower ETR) Controversy should not be the tail-end of the process Financial reporting requirements ASC 740/ASC 450;
aka (FIN 48/FAS 5) Maximize foreign tax credit utilization by exhausting all
remedies Develop global strategies (proactive vs reactive) Tax risk management is an integral part of enterprise risk
management Identified best practices (80% of large corporations have a
coordinated global controversy process) Timely feedback for necessary changes-improve visibility
68 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Brainstorming from 3/11
How might we improve our tax controversy management Front end involvement in planning Team coordination of global risk and controversy Enhance existing tracker tools Develop strategic approach to resolution
69 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Objective of coordinated controversy
Manage the identification, tracking, communication and coordination of global controversy and risk mitigation with respect to all areas of taxation, including but not limited to:
U. S. Federal Income U.S. State and Local Income International Income Tax Transaction Tax (i.e. sales & use tax, value added tax,
property tax) Payroll Taxes Other taxes for which the company is ultimately liable or
responsible
70 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.
Short Term Objectives - 2011
Enhance working relationships with planning team to properly document strategic initiatives
Begin to mitigate Fin 48 issues arising from lack of documentation
Identify jurisdictions where deduction is threatened because of lack of documentation
Develop database of historic intercompany issues and their resolution – reduce duplication of effort
Identify and form ad-hoc controversy team Develop uniform process for communicating potential
exposures to SVP-Tax and F&A & Advisors Develop strategy for audit, litigation, competent authority
decision or alternative resolution process and statues
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Environmental Challenges
Globalization/information sharing Increase in transparency (UTP/FIN 48 disclosures) Resource allocation Government deficits Aggressive enforcement activity Emerging audit techniques New penalty regimes Pressure to reduce ETR vs. historical risk adversion
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Long Term Objectives – Post 2011
Define, develop and implement issue tracker tools to the specifications of global controversy requirements & F&A that feeds to the FIN 48/FAS 5 tool
Develop and implement uniform Information Document Request tools
Develop corporate practice for coordination of global controversy process
Partner with internal audit to ensure integrity of global tax controversy process
Partner with internal audit to ensure planning strategies are implemented, executed, and maintained in accordance with the plan
Implement a rotation/training process to develop expertise
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Mitigate FIN 48 Documentation Issues
For example, material exposures for E. Hemisphere at 12/31/2010 were $USD 82M
Approximately 50% relate to documentation issues including deficient or insufficient support
Arbitrary behavior of tax authority cannot be ruled out Direct correlation with jurisdictions favoring substance over
form such as Eurasia, Middle East, Africa, Asia Pac, Indonesia.
There are similar issues in Western Hemisphere (i.e. Canada).
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FIN 48 Issues - Continued
Specific issues include head office allocations, regional cross border charges, intercompany expenses, verification of reduced treaty rates on WHT, and business expense generally.
Risks increase with acquisitions and internal restructurings Recommend analysis of each FIN 48 UTP to identify the
documentation issues and required mitigation– Link to internal audit and existing controls– Consider short term assignment – Educate system users to integrate SAP to maximum
benefit Investigate FAS 5 and VAT issues
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Expand Current FIN 48/FAS 5 Talisman Functionality
1. Add Tax Controversy “Sandbox” at front-end 2. Issue progresses to UTP under FIN 48 or
contingency under FAS 5 or does not mature as a liability
3. Issue is potentially queried by taxing authorities and progresses to the IDR Tracking Tool
4. Issue progresses to the Global Tax Audit Issue/Experience Tool upon audit resolution
Refer to Controversy Process Flow on slide 18
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Personnel Structure for Global Controversy Team
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Uniform IDR Tracker Tool – Long term objective
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Uniform IDR Tracker Tool - Continued
Creates visibility of document requests made by auditors and documentation subsequently provided– Identifies source documents previously compiled by others
thereby eliminating duplicative efforts and allows for a uniform response to same questions year after year or from auditors in different jurisdictions for the same time period
– Forces a level of accountability on us as audit coordinators to keep the audit moving
– Establishes an argument for potential penalty or interest waivers or other favorable negotiations when delay is on the jurisdiction
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Uniform IDR Tracker Tool - Continued
Establishes a historical log of what documentation was requested and provided in prior audits– Beneficial in preparing for newly generated audits– Indirectly serves as a road map or training tool for new
staff assigned to a specific jurisdiction’s next audit cycle Creates easy access to documentation submitted through
document linking Creates a searchable database where information can be
easily filtered by type of request, entity, date, etc Enables management to move from one IDR tracker tool to
another among the various tax types with ease due to the uniform format
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Historical Database of Issues and Resolutions – Short Term Objective
Reduces duplication of effort Supports FIn 48 position Highlights need for review of issues in other jurisdictions Identifies potential controversies in other jurisdictions Provides for consistent worldwide position Helps in decision process of resolution in other jurisdictions Must include audit theories/positions on the issue Did the final outcome resolve the issue or just settle the
current audit Actions taken after the resolution
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FAS 5/FIN 48 (F&A) Status Reporting Query (Country/
Region Updating)
IDR Tax Tracking Functionality
(International, U.S., State (U.S), Sales & Use Tax)
Global Tax Audit Issue/Experience Database
(Issues by jurisdiction, period, tax auth position, response/strategy, ultimate resolution)
Planning Initiative
June 14, 2011
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Planning InitiativeTeam Members:Mark Purnell Steve PipkinSteve AxlerJoe HobsonShirley LiTrina YehFaye BrownSimone MalbyYannis SteeleReginald Butler
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Introduction
We looked at the tax planning lifecycle, from idea generation, through design & implementation to maintenance and audit controversy
Identified the following areas as key opportunities for improvement:– Develop internal expertise/resource– Integrate Tax within the broader organization– Data availability and management– Incentivizing for Tax– Project Management
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Planning Initiative No. 1
Identify & Develop Internal Resources
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Identify & Develop Dedicated Internal Planning Resources
No need for a separate & independent planning department Can create silos inside tax department Halliburton is not of the size to merit a separate tax
planning group Current RTM structure works very well
Based on discussions with PwC, EY & other companies Good planning comes by fostering communication
with the different tax department groupsCreate responsibility of certain individuals to
promote active communication
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Identify & Develop Dedicated Internal Planning Resources – Cont’d
Take Away: Should be a structure in place to coordinate and track planning ideas with oversight by one or two individuals. This is done to make sure that any RTM plans do not cause adverse US tax impact and vice versa
Take Away: Regroup former tax planning committee consisting of US and international members
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Planning Initiative No. 2
Integrate with F&A / Operations
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Should Tax Integrate Better with Other Departments & How?
Perception is that we operate in a silo. Too often we are brought in as an after thought Need to get “front & Centre” in peoples minds to involve tax asap
F&AHemisphere/Director Level – regular meetings being held
and will continueRTM level – regular meetings to be scheduled between
RTM’s and respective controllersHome office – consider periodic meetings with division and
PSL controllersNote – physical proximity to F&A only considered important
at the RTM level
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Should Tax Integrate Better with Other Departments & How? - Cont’d
OperationsRTM should attend Region VP strategy/
planning/periodic team meetingsTax should attend PSL/Division strategy meetingsProbert to meet Andolino annually to discuss strategy
and planso Tax needs to bring value to these meetings and not
be “passengers”Consider appointing each PSL a “go to” Tax personConsider an Income Tax Functional Mailbox
“FHOUINCTAX”
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Should Tax Integrate Better with Other Departments & How? - Cont’d
We have to get more pro-active BUT the rest of the organization also needs to get more focused on tax and our voice needs to be heard more It’s a battle to make a difference when you
don’t have the “ears” of the organization
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Planning Initiative No. 3
DATA
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Data Management & Availability
Critical Tax Planning Data Points & Where They Currently Reside: DCL: Excel Spreadsheet & Talisman Report E&P, Tax Pool & Tax/Stock Basis: E&P/Tax Pool –
Current Year in CorpTax, Prior years – Excel Spreadsheet. Initiative Underway to Reside on a Talisman Application.
Gain Recognition Agreements (GRA): Talisman FTC Limitation/CB/CF: CorpTax Dividend Planning Tool: Initiative Underway to
Reside on a Talisman Application
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Data Management & Availability Continued
NOL: Talisman State Apportionment Factors: CorpTax &
Spreadsheets Tax Treaty Information: Outside Publications Overall Tax Return Metrics: US return in CorpTax Global Financial Data: Current Sources are SAP,
Hyperion, HFM, Essbase, Talisman, Business Objects Forecasted Financial Data: Current Sources are
Talisman & HFM Transfer Pricing: SAP Reports
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Data Management & Availability Continued
DTA & DTL: Intl - FIT/Talisman , US -TIS/Excel Tax Systems Project Team recommends conversion
from CorpTax to ONESOURCE Phased in to 1st Qtr 2013 ONESOURCE , Utilizing the ORBITTAX Module, Will
Enable Us to Perform Sophisticated Repatriation Planning Including Best Effective Tax Rate Analysis Taking into Consideration Withholding & Tax Treaties
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Data Management & Availability Continued
ONESOURCE Provides a Single Tax System Platform Supporting: Global Provision and US Compliance Tax Planning and Tax Controversy Processes Future Leveraging to Support Local Country
Compliance Visibility of Global Tax Attributes
Obtaining Longer Term and Accurate Forecast Financial Data as well as Good Statutory Financial Data are Needs Going Forward
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Planning Initiative No.4
Incentivize
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Incentivize Halliburton Organization To Reduce ETR
Create environment where all groups inside Halliburton are motivated to lower ETR Issue of “above the line” vs. “below the line”
Explored with Tim Probert and Dale French the idea of tax savings being factored into above the line results for management/bonus purposes Probert expressed concern about distracting PSLs
and country managers, i.e. focusing on tax and not on the businessBelieved there are other ways to incentivize such
as through MVP
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Incentivize Halliburton Organization To Reduce ETR - Cont’d
Dale French expressed concern about how this would be calculated & done at the accounting level
Both PwC and EY confirmed the vast majority of companies are aligned with Halliburton in that operations are incentivized with before tax results
Key is to create corporate culture such that all groups are focused on improving the after tax results
Take Away: Issue is to push this concept down to the mid-level management
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Planning Initiative No. 5
Improve Project Management
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Planning Process Idea Generation Review / Analyze Request Information
Data Inputs from F&A, Legal, Others
Evaluate Decision – Pursue / Reject Prepare Business Case Approval OSCR Process Implementation
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Project Management
Best Practices Identified: Develop a Protocol for Privileged Information –
Estimated Completion Date: 7/31/11 Develop Check Lists to Ensure Business & Tax
Requirements are met – Estimated Completion Date 7/31/11.
Audit “Implementation” by the Planning Group or Internal Audit to Ensure Transactions are Flowing in Accordance with the Plan.
Assign a Tax Department Person to Review Old OSCRs for Completeness or Abandonment – Estimated Completion Date: 7/31/11
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Questions /Comments