Effectiveness and efficiency of operations, the reliability of tax reporting, and compliance with applicable laws and regulationThe tax function will face challenges when no formal documented strategy, objectives or planning exists to direct the tax function or tax department or when senior management does not have written and agreed-upon objectives and risk tolerance levels in formulating tax planning and strategies.
Without a proper tax policy it depends on your personal influence within your organization to kick-start a change. Often that results in a fragmented approach, as not all stakeholders will be convinced. The outcome is that this will negatively impact defining standardized and global controls.
This will improve if the tax department’s strategy, objectives and risk tolerance is understood by everybody in the tax department and throughout the organization and signed off by senior management.
The indirect tax department objectives and strategies should also be aligned with the company's business objectives and overall tax strategy as a whole. When the tax department does not have direct relationships with key stakeholders, including CFO, audit committee, internal audit and tax authorities, efforts should be made on creating and maintaining productive and proactive tax stakeholder relationships.
When a tax risk policy, including definition of risk tolerance levels associated with tax planning does not exist, this should be set up as this will support effective management of tax risk when allocating resources.
Important is as well that the organizational structure meets the tax department requirements. That means that it should be mutually aligned and periodically updated between the indirect tax department and the corporate finance function, procurement, legal, IT, business and other stakeholders and is designed to support stakeholder needs.
A split should exist of roles, functions and responsibilities between tax department and the business are well documented in manuals, procedures and working instructions. This documentation should be available on-line for all stakeholders in order to optimize that the tax department professionals are involved in time to support multidisciplinary teams in projects and programs and that the added value of the tax department is also clear for the business.
The tax department should be up to date with the latest developments in the organization to be able to perform its advisory role to the business. This means there should be a well-equipped learning & development environment to keep tax staff up to date with latest developments.
External representation and lobbying to influence policies on various levels of government (local, national and European scale) has to be considered as it builds and maintains relations with government and other industry stakeholders and will support indirect tax planning.