With the results of KPMG's Global CEO Outlook Survey recently launched, I wanted to take a moment to reflect on the tax-related findings of the survey, and offer some perspective on what CEOs (and their finance and tax teams) should be aware of from a tax perspective in their quest for sustainable growth within their organizations. This is the first in a series of posts I will write on this topic.
According to the research, on a global basis, most CEOs appear less concerned with tax risk in and of itself—at least as it pertains to their organization’s ability to grow. In fact, just 5% of CEOs specifically identify tax risk as a barrier to growth. On the other hand, 28% said that changing tax laws are causing them to rethink their business models, which shows that many CEOs do recognize the attention that needs to be paid to tax.
This could be why we increasingly see accountability for tax oversight happening at senior levels of the organization. A quarter of CEOs said that the responsibility for tax risk ultimately lies at their own front door, while 46% stated the responsibility for tax is that of the CFO, and 29% cited the chair of the audit committee as the key overseer of tax.
This apparent shift toward senior-level accountability for tax risk overall is consistent with what I am seeing in the market. Of course, CEOs will remain heavily reliant on their organization’s specialists to monitor tax risk, but the emerging correlation between tax and reputational risk means that CEOs themselves will need to take more overarching responsibility for this in the future. It clearly is a financial risk that would commonly go to the CFO, but it is a broader risk than that in terms of the reputation of the organization, which would take it either to the chair of the risk committee or audit committee or the CEO, and I think the data supports this.
Most interesting for me, is the fact that many of the risk areas that CEOs cite as posing the most significant risk to their companies’ growth have strong tax implications, including two of the top threats: “a return to territorialism,” (55%) and “reputational and brand risk,” (26%). Anecdotally, many of the CEOs I speak to consider tax as an important consideration in both of these areas, but that does not necessarily come to light in the survey data. If you are a senior tax leader in a multinational organization, you may want to speak to your CEO about the tax implications of these key areas of the business.
In my next post, I will explore what I see as the five key risk areas for CEOs and their leadership teams to be thinking about in today’s environment, and suggest approaches for mitigating each of these risks. Until then, you can find additional CEO Outlook insights here, including a recent blog on the topic from KPMG International Chairman, Bill Thomas, “For CEOs, digital just got personal.”