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Tax risk management
- By Daren Yeoh
- Published 1/01/2007
- Moore Tax News
- Unrated
Tax Risk management has become an area of increasing focus for corporate Australia. The type of risks associated with tax are operational or financial risk, legal, market and reputational risk. These can be specifically represented by an under-provision for the payment of tax, inaccurate or incomplete disclosure in financial reports and the inability to achieve a low marginal tax rate.
These risks can be managed through a number of corporate elements, including policies, controls and procedures, and good corporate
governance.
The issue has been highlighted by the ATO, initially by the previous Commissioner of Taxation, Michael Carmody, and continuing under the present incumbent, Michael D’Ascenzo. The ATO has sought to raise tax risk management to the attention of the boards of the large companies of corporate Australia, firstly (in 2004) by a letter listing ten elements of risk for consideration and secondly (in late 2006) through ‘A governance guide
for board members and directors’.
There are two main issues addressed in the booklet, i.e. ensuring adequate accounting and control mechanisms and including tax as part of an organisation’s strategic role planning. There is also a discussion on when an ATO audit could be triggered and the types of activity which could attract ATO attention.
An integrated risk management framework, including taxation and developed at the board level, is recommended. Although companies may have risk management policies in place for other areas, tax can be neglected. A survey in 2006 showed that 40% of respondents recognised that their corporation had risk areas not being actively managed. The same report also stated that only 19% respondents rated the quality of their risk management to
be high or very high. Clearly, corporate Australia still has room for improvement in the area of tax risk management.
Moore Stephens can assist with the development of a tax risk management charter.
We can produce a policy and procedures manual for the tax function in your organisation. We can assist in producing a company wide risk charter or integrating a new tax risk management charter into existing risk frameworks.
Call Daren Yeoh on 03 9614 4444 for further assistance.
These risks can be managed through a number of corporate elements, including policies, controls and procedures, and good corporate
governance.
The issue has been highlighted by the ATO, initially by the previous Commissioner of Taxation, Michael Carmody, and continuing under the present incumbent, Michael D’Ascenzo. The ATO has sought to raise tax risk management to the attention of the boards of the large companies of corporate Australia, firstly (in 2004) by a letter listing ten elements of risk for consideration and secondly (in late 2006) through ‘A governance guide
for board members and directors’.
There are two main issues addressed in the booklet, i.e. ensuring adequate accounting and control mechanisms and including tax as part of an organisation’s strategic role planning. There is also a discussion on when an ATO audit could be triggered and the types of activity which could attract ATO attention.
An integrated risk management framework, including taxation and developed at the board level, is recommended. Although companies may have risk management policies in place for other areas, tax can be neglected. A survey in 2006 showed that 40% of respondents recognised that their corporation had risk areas not being actively managed. The same report also stated that only 19% respondents rated the quality of their risk management to
be high or very high. Clearly, corporate Australia still has room for improvement in the area of tax risk management.
Moore Stephens can assist with the development of a tax risk management charter.
We can produce a policy and procedures manual for the tax function in your organisation. We can assist in producing a company wide risk charter or integrating a new tax risk management charter into existing risk frameworks.
Call Daren Yeoh on 03 9614 4444 for further assistance.
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