Special Report: Global Tax Audit and Controversy Risk Management

26 Pages Posted: 26 Mar 2010 Last revised: 21 Jun 2011

Date Written: March 26, 2010

Abstract

Managing tax risk is one of the greatest challenges for tax departments around the world (creating the opportunities to build relationships with revenue services), starting with the verification audit through to the resolution of tax controversies. A recent survey supports this contention. Key aspects that emerged can be summarized as follows:

Tax risk is everywhere. Companies continue to face increased pressure on the tax function. As a result, tax functions are focused on addressing risks in every major area of the tax life-cycle: planning, provision, compliance, and controversy. Improving the tax function is clearly more important than ever, with more than 90% of companies indicating this will be an important area for them over the next two years.

People are a tax risk: 87% of respondents identified people as an important challenge facing the tax department. Companies are struggling to get enough people to staff their tax department. They are also challenged to train the people they have, with 77% of companies indicating that the lack of skilled resources is a contributing factor to tax risk.

The trend (proactive versus reactive): Today, companies report a significant increase in the time they spend identifying, managing, tracking, and responding on tax risk. The number of companies who spend at least 20% of their time on tax risk increased over the last two years from 16% to 25%. Leading tax functions are responding by becoming more efficient and broadening their response to risk. Building linkages to other parts of the organization is becoming increasingly important.

Communication is key: Companies that have regular communications with their board about tax risk are also more likely to report having specific measures in place to address those risks. The difference seems to be that they take a broad approach to tax risk assessment and work to efficiently leverage their people, processes and technology.

Keywords: tax risk management, global audit, multinational, tax risk, tax controversy, risk management, special report

JEL Classification: M49, D81, K34

Suggested Citation

Erasmus, Dr Daniel N., Special Report: Global Tax Audit and Controversy Risk Management (March 26, 2010). Thomas Jefferson School of Law Research Paper No. 1575723. Available at SSRN: https://ssrn.com/abstract=1575723 or http://dx.doi.org/10.2139/ssrn.1575723

Dr Daniel N. Erasmus (Contact Author)

Thomas Jefferson School of Law ( email )

701 B Street
Suite 110
San Diego, CA 92101
United States
561-568-7115 (Phone)

HOME PAGE: http://www.taxriskmanagement.com

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