A new era of global risk and uncertainty:
2011-12 tax risk and controversy survey
The CFO perspective - at a glance
CFOs must work more closely than ever with tax departments to minimize the risk of controversy, and ensure that key tax risks are brought to the attention of the board and management team.
88% of large company respondents overall agree that tax risk and controversy management will become more important to them, but among CFOs, this proportion is only 50%.
An era of high tax risk and controversy
Never before have tax practices attracted higher scrutiny, companies been more exposed to the likelihood of tax litigation and the penalties for tax infringement been greater. Tax authorities have become increasingly assertive in examining cross-border activities and tax planning, and are sharing information to an unprecedented extent.
Audits are more frequent and aggressive, and more costly to defend or litigate. Penalties may now reach billions of dollars, and companies are under increasing scrutiny from advocacy groups and the news media.
Are CFOs unaware of the scale of the risks involved?
Our recent survey, of 541 CFOs and tax directors, as well as 100 audit committee members, found divergent views between finance leaders and their tax functions about the severity of the tax risk and controversy environment.
For example, 75% of tax directors in the largest companies report heightened risk or uncertainty around tax legislation. But among CFOs of those companies, this figure is just 57%.
Similarly, 88% of large company respondents overall agree that tax risk and controversy management will become more important to them, but among CFOs, this proportion is only 50%.
While some of this divergence may be due to the fact that the CFO’s focus is far broader than tax, they may also offer warning that CFO’s and executive team’s efforts to drive growth may not align with tax departments’ tax risk tolerance.