Risk management has become a key measure for corporate tax departments, as corporations acknowledge the potential reputational and broader risks that tax can pose to their business, according to a report from consulting firm Price Waterhouse Coopers (PwC).
A PwC survey, Tax Function of the Future,
which examined over 100 tax departments, found that risk management has become the most important measure of tax function performance.
However, 58% of companies have board or senior level managers vet their tax strategies, but the companies who do are more likely to publish the strategy and review it regularly.
"The costs of poor risk management can easily outweigh incremental changes in the effective tax rate. Public and political scrutiny on tax behaviour, resulting reforms to tax rules, and changing attitudes of tax authorities and governments are among the issues contributing to a higher risk environment,” explained PwC tax partner Mark Schofield.
He added, “It’s not just about the risk of paying too little tax, but equally the risk of being taxed twice. Businesses want stability and certainty on tax, so it’s no surprise that having a sustainable tax rate is also seen as important. “
With the new tax environment comes new skills set requirements, the survey also revealed. Around 70% of the respondents noted the increased need for good communication skills, and will increase within the next five years.
Further, focus is increasing on recruiting professionals who have risk management and technical skills, with demand outpacing supply.
“Tax today is attracting a different type of person than, say, 20 years ago. You can't get away with just having an analytical mind - making sure your stakeholders understand what the business is doing on tax, and why, demands sound communication skills, especially given the complex nature of both the tax system and business models today. Technology is also transforming tax functions, enabling businesses to respond to the increasing demands for data, with transparency front of mind,” Schofield concluded.
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