LeSage: Tax has been a “boardroom issue”
for many years, given its significant impact
on companies’ financial statements. Leading companies are effective in including tax
as a key stakeholder as they establish corporate strategy and evaluate overall business
risk. Tax cost is often 20% – 30% of product
/ services cost and should be a key consideration in establishing corporate strategy and
target operating models (TOM).
With tax reporting and analytical tools,
multinational enterprises and others can
more easily analyze detailed data (even
transactional data) to validate TOM hypoth-eses, confirm forecasting expectations, and
operationalize critical business functions.
These tools can analyze vast amounts of
data to highlight exceptions, variances analysis, and reassess the reasonableness of current positions (like inter-company prices).
With such insights, companies are better
positioned to detect compliance risk early
on and take appropriate action. These tools
also can highlight opportunities for future
efficiencies or cost savings. With the results
of the U.S. recent election, evolving tax policy and tax reform will likely have an impact on many companies’ business models,
financing structures, and value chains and
could raise tax’s profile even higher.
We expect there to be substantial activ-
ity in the coming months and years as tax
leaders work with other leaders within their
businesses to model the impact of potential
tax law changes, determine next steps and
eventually operate under new legislation.
As the new administration and Congress evolve tax policy, tax functions
that are integrated into supporting the
business strategy while taking care of required regulatory compliance could bring
significant value and business advantage
to their organizations.
: As tax supports the
business strategy in the anticipated new
regulatory environment, internal communications and coordination will become
critical for businesses. How do companies
take evolving tax policy into account while
appropriately managing the risk of compliance and reporting?
LeSage: The tax function can support the
business in a variety of ways, and different
companies look for different support.
Think of it as a spectrum: on one end
of the spectrum, the tax function solely
takes care of regulatory compliance and
reporting. On the other end, the tax function is engaged in all major business decisions, and business decisions are made on
an after-tax basis.
Either approach, or something in-between, can work for a company. What is vital is alignment between the board, C-suite,
and the chief tax officer regarding the desired level of engagement and business support by the tax function.
Similarly, think of tax risk along a spectrum. Most companies say “I don’t want to
be on the front page of the Wall Street Journal.” But how do you operationalize that?
One end of the tax risk spectrum takes a
very conservative approach, expecting that
when a government examination is under-taken, there should be no adjustments. In
this case, conflicts are minimized-- but a
company may pay more tax than their peers
or even more than is required.
On the other end of the spectrum, a
“The tax function can support the
business in a variety of ways,
and different companies look
for different support.”