KPMG report: Update on tax control framework requirements

Tax authorities worldwide increasingly expect companies to have effective approaches regarding tax risk management.

Tax authorities increasingly expect companies to have effective approaches

Alongside recent global trends such as BEPS 2.0 and tax transparency, tax authorities worldwide increasingly expect companies to have effective approaches regarding tax risk management. In particular, companies must provide global tax transparency and facilitate real-time tax compliance and data-oriented auditing by tax administrations. These developments make a fully integrated tax control framework (TCF) essential.

In 2016 the OECD published guidelines with regard to TCFs. Since then, various countries have implemented country-specific TCF requirements: Germany (tax compliance monitoring system, IDW PS 980), UK (publication of tax strategy), Netherlands (cooperative compliance program), Spain (VAT reporting system), and Australia (guidance on tax control frameworks). So far, Switzerland does not have country-specific TCF requirements. Nevertheless, if a global company is operating within a country with TCF requirements, it makes sense to roll out the TCF within all countries the company is operating in.

Benefits of a TCF

Furthermore, it is increasingly important to have dynamic and consistent tax risk management procedures in place so as to create business value and minimize risk, providing the ability to respond to a fast-changing tax environment. A TCF can ensure that local and global tax risks are identified, measured, understood and that appropriate responses are in place to mitigate the impact of the risks. It also supports the tax function in identifying tax opportunities and integrating governance policies as well as internal controls – taking into account a wide range of tax topics such as corporate income and capital tax, value added tax (VAT), and transfer pricing. What is more, a TCF improves a company’s image and increases the confidence of the tax authorities, potentially resulting in less inquiries and audits which in turn lowers costs and resource requirements.

Technology to support a TCF

Technology can provide important support to a TCF. Solutions on the market can assist in providing a centralized compliance tool including for example data collection, workflow collaboration, data management, analytics, and document management. Furthermore, they provide features such as central strategic overviews of tax risks with illustrations of effects of mitigating activities. Additionally, they offer automations to ensure that delegated controls are easily performed, documented, and reported.

Read a June 2022 report prepared by the KPMG member firm in Switzerland

 

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