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
©2016. For information, contact Deloitte Touche Tohmatsu Limited.
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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
©2016. For information, contact Deloitte Touche Tohmatsu Limited.
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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
©2016. For information, contact Deloitte Touche Tohmatsu Limited.
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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
©2016. For information, contact Deloitte Touche Tohmatsu Limited.
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Tax strategy –setting it,
communicating it and delivering it
What is a tax strategy? How do you define your goals…?
©2016. For information, contact Deloitte Touche Tohmatsu Limited.
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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
©2016. For information, contact Deloitte Touche Tohmatsu Limited.
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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
©2016. For information, contact Deloitte Touche Tohmatsu Limited.
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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
©2016. For information, contact Deloitte Touche Tohmatsu Limited.
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Requires an organisational response
Communicating your tax strategy
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
©2016. For information, contact Deloitte Touche Tohmatsu Limited.
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Example dashboard - report your contribution to the overall corporate strategy
Communicating your tax strategy
©2016. For information, contact Deloitte Touche Tohmatsu Limited.
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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
©2016. For information, contact Deloitte Touche Tohmatsu Limited.
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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
©2016. For information, contact Deloitte Touche Tohmatsu Limited.
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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
©2016. For information, contact Deloitte Touche Tohmatsu Limited.
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Faculty
Mark Kennedy, Deloitte UK
Partner
Marco van der Meer, Deloitte Netherlands
Senior Manager
+44 20 7007 3832
+31 (0) 882883273
©2016. For information, contact Deloitte Touche Tohmatsu Limited.
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© 2016. For information, contact Deloitte Touche Tohmatsu Limited.
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