FANews
FANews
RELATED CATEGORIES
SUB CATEGORIES Featured Story |  Straight Talk |  The Stage | 

Deloitte backs trend toward tax risk management

18 May 2007 Gareth Stokes

Deloitte recently conducted a Tax Risk Management Survey to determine South Africas corporate response to the ever-changing tax environment. The survey attracted 147 responses from 48 listed companies, 26 multinationals and a number of large organisations

The key findings of the report were released at a press conference in Johannesburg on 15 May 2007. Speaking at the presentation, Deloitte Global Head of Tax Risk Management, Alan MacPherson said that the survey confirmed that "where South African companies are and where the South Africa Revenue  Services is, is very much in the same position as where the UK and Australia were nearly two or three years ago."

In the next few years, MacPherson believes "the big trend in Africa will be much more focus on tax risk."

Managing tax risk should be a top priority

The survey revealed that most large companies in South Africa adopt a cautious approach to taxation. Company management remained reactive, addressing various issues of compliance as they arose, rather than attacking tax requirements proactively. A proactive approach requires company management to consider the tax implications of business strategy at the earliest stage of planning.

Traditionally, businesses kept the tax department at arms length. To ensure future business success, there is a definite need for the tax department to be viewed as an integral part of the business - to be brought back into the fold, so to speak. This will ensure that the required emphasis is placed on tax risk management.

MacPherson stressed "one of the key findings [of the survey] was that taxpayers generally, 86% of them, said that tax risk management was very important to the organisation." South African corporations will be able to learn a great deal from international experiences, where as many as 90% of companies have tax risk strategies in place.

A 'perfect storm' brewing in the tax environment

In a recent Hollywood blockbuster, The Perfect Storm, we watched the result of three storms moving together to form a 'super' storm. MacPherson uses this movie as an analogy for what is happening in the tax world right now.

"This for me is like the 'perfect storm' for tax, because investors, regulators and tax authorities are all interested in the same point at the same time," said MacPherson. The implication of this stronger focus on tax is ably demonstrated by the massive regulatory burden on today's multinational corporation.

As an example of this burden, Deloitte mentioned an international company operating in 70 countries around. This operation had to comply with as many as 15, 000 legislative processes in a year. And these processes related to corporate tax requirements only. Despite best intentions, the administrative burden of tax in coming years is unlikely to lessen.

Tax strategy shared from the top down

It is important for tax risk strategy to be formulated at board level. As an example of the differences that can exist, consider the conflicting views presented by two board members at one of Deloitte's clients. One believed that tax was nothing more than a cost to the company. He believed that it should be minimised and eliminated wherever possible. Another argued that taxes represented the corporations obligation to the community.

Such differences have to be dealt with at board level to prevent the disparate views from filtering to the entire corporation. Annemarie Schroder, Director Tax at Deloitte believes that "a well managed and communicated tax risk management process can help ensure that tax opportunities and plans are more successfully implemented and that tax exposures are reduced."

The next step seems to be for South African business leaders to back their own beliefs. The 86% who believe that tax risk management is essential to the organisation should implement such strategies and secure shareholder value through a focus on tax risk management in the coming years.

Editor's thoughts:
A focus on tax risk management makes sense - and one does not have to look too hard to see its value for the small and medium company too. We are more interested in how you view tax. Do you strive to minimise your tax by any means possible, or do you prefer to view your tax payments as a valuable contribution to your community? Send your comments to
gareth@fanews.co.za

Quick Polls

QUESTION

How confident are you that insurers treat policyholders fairly, according to the Treating Customers Fairly (TCF) principles?

ANSWER

Very confident, insurers prioritise fair treatment
Somewhat confident, but improvements are needed
Not confident, there are significant issues with fair treatment
fanews magazine
FAnews June 2024 Get the latest issue of FAnews

This month's headlines

Understanding prescription in claims for professional negligence
Climate change… the single biggest risk facing insurers
Insuring the unpredictable: 2024 global election risks
Financial advice crucial as clients’ Life policy premiums rise sharply
Guiding clients through the Two-Pot Retirement System
There is diversification, and true diversification – choose wisely
Decoding the shift in investment patterns
Subscribe now