Why Tax directors need to wear multiple hats?
The role of the tax director has evolved from largely compliance driven to a more commercial strategic focus of ensuring that the alignment of the tax agenda of the company is at the forefront of the CEO and the Board.
Speaking at the firm’s annual Africa Tax Conference, EY Tax Performance Advisory Director, Daryl Blakeway says with a dramatic increase in tax director appearances in the boardroom to address the needs of their internal stakeholders, tax directors need to be involved in:
- Managing commercial dynamics of tax policy with an economic understanding;
- Participating in the public debate of influencing tax policy, and
- Strategically thinking about tax planning and tax risk management around the business agenda.
Blakeway says, “what makes this more complex is that in a number of jurisdictions, tax regimes have not kept pace with the developments in the global economy. It is imperative to understand that as Governments focus on protecting their tax base; the tax legislative landscape is forever changing, resulting in potential risk for the increase in major tax controversy, which often results in harsh financial and reputational penalties.”
As an example, Blakeway says, “While transfer pricing and tax effective supply chain management supports the business strategy and helps to maintain the competitive advantage in delivering value to the shareholders, there has been a significant rise in the volume and aggressiveness of tax audits as Governments seek to protect their revenue base.”
As tax directors realise that successfully and proactively managing uncertainty and tax risk it is a key imperative to have effective tax risk management processes and reporting in place. This should include a global approach to tax risk and controversy management making strong corporate governance in tax a priority and staying connected with global legislative, regulatory and tax administration changes. To allow tax directors to focus on this they need to stay close to every aspect of the business and be supported by using internal and external audit to support the risk management process. Enhanced tax technology to improve efficiencies and effectiveness of compliance and reporting is a growing trend supporting this role.
Ultimately the organisation’s asset value needs to be protected and tax directors thus walk a fine line between helping to realise reward while managing risk, Blakeway adds.
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Following on from EY’s successful integration in 2008 of 87 countries into one area from across Europe, Middle East, India and Africa (EMEIA), the firm has launched its Africa Business Center™ (ABC), which aims to enhance the effective and efficient links between its geographic reach and areas of expertise. The firm enjoys representation in 33 countries across Africa.