The OECD Guidelines for Multinational Companies indicate what can be addressed: “It is important that enterprises contribute to the public finances of host countries by making timely payment of their tax liabilities. In particular, enterprises should comply with the tax laws and regulations in all countries in which they operate and should exert every effort to act in accordance with both the lett
er and spirit of those laws and regulations. This would include such measures as providing to the relevant authorities the information necessary for the correct determination of taxes to be assessed in connection with their operations and conforming transfer pricing practices to the arm’s length principle.”
The tax philosophy needs to be embedded in the overall goals of the business. As the code of conduct it must not only be a set of rules for good behavior but must be part of company’s culture and become a factor in everyday business dealings27. Establishing a position requires the board to decide on the focus areas for tax management. Is tax mainly seen as a normal cost factor that needs to be minimized as a duty to shareholders or is its payment a social obligation and a duty to the local community. Most companies take a position closer to the idea that ‘tax is a cost factor’ and therefore a decision needs to be made on how aggressive tax management should be and what level of risk is acceptable for the company. Companies need to be proactive with tax risk management which requires decisive steps to be taken by the Business Owners and tax manager. The aim of the process is to eliminate the tax risks before they become disputes, and with adequate tax risk management process, the taxpayer’s ability to tax plan into the future increases proportionately. Tax should be an integral part of the internal control and the risk management system of a business. Check out my professional profile and connect with me on LinkedIn. http://lnkd.in/ztjfVz
