finn l. meyer, kpmg: what constitutes responsible corporate tax behaviour
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What constitutes responsible corporate tax behaviour and how can companies work responsibly with tax?
How to work responsibly with tax
Conference on Tax and Corporate Responsibility
21 June 2012
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Taxman hits Motorola with big bill
HP’s offices in Moscow raided as part of investigation into tax evasion
Australia Serves TPG With
$628 Million Tax Bill
Big four banks in $1.7bn NZ tax settlement
Tax Governance: Why?
The impact of getting it wrong can be dramatic!
The tax avoidance story as a morality tale
IRS Accepts Settlement Offer in Largest Transfer Pricing Dispute
Canada Revenue Agency applies a
magnifying glass to financial services
transactions and institutions China Weaves a Tax Net over Offshore SPVs
Merck to Pay $2.3B in IRS Dispute
GlaxoSmithKline Holdings, IRS Reach Largest-Ever $3.4 Billion Tax Settlement
AstraZeneca agrees to pay
£505m to settle 15-year tax
battle
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Business Week: Google
Kilde: Business Week
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GE: Better share all the rest
G.E. is so good at avoiding taxes that some people consider its tax department to be the best in the world, even better than any law firm's.
One common strategy is maximizing the amount of profit that is officially earned in countries with low tax rates.
Source: Wall Street Journal, February 3, 2011
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International Herald Tribune
Kilde: International Herald Tribune
"G.E.'s giant tax department, led by a bow-tied former Treasury official named John Samuels, is often referred to as the world's best tax law firm. Indeed, the company's slogan "Imagination at Work" fits this department well. The team includes former officials not just from the Treasury, but also from the I.R.S. and virtually all the tax-writing committees in Congress."
"Minimizing taxes is so important at G.E. that Mr. Samuels has placed tax strategists in decision-making positions in many major manufacturing facilities and businesses around the globe. Company officials acknowledged that the tax department had expanded since he joined the company in 1988, and said it now had 975 employees.At a tax symposium in 2007, a G.E. tax official said the department's "mission statement" consisted of 19 rules and urged employees to divide theirtime evenly between ensuring compliance with the law and "looking to exploit opportunities to reduce tax".
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A tax code that works for the wily (nice ships)
Carnival Corp. Would not have much of a business without help from various branches of the U.S. government.
The U.S. Coast Guard keeps the seas safe for Canival's cruise ships.
Customs officers make it possible for Carnival cruises to travel to other countries.
State and local governments have built roads and bridges leading to ports where Carnival's ships dock.
Carnival's biggest government benefit of all may be the price it pays for many of those services.
Over the last five years, the company has paid total corporate taxes - U.S., state, local and foreign - equal to only 1.1 percent of its cumulative $ 11,3 billion in profit.
Source: Wall Street Journal, February 3, 2011
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Tax dodgers
Kilde: The Economist, April 30th - May 6th 2011
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Tax dodgers
Kilde: The Economist, April 30th - May 6th 2011
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Kilde: The Sunday times 11.09.11
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Top Companies who gave their bosses more than the firms paid in tax
Kilde: The Sunday times 11.09.11
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Vodafone shops blockaded in tax protestAlso happened to Boots
BBC 30. oktober 2010
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The secret of IKEA's success
But the firm's ownership structure is opaque.
Critics grumble that its set-up minimises tax and disclosure, handsomely rewards the Kamprad family and makes IKEA immune to a takeover.
The parent for IKEA Group, which controls 284 stores in 26 countries, is Ingka Holding, a private Dutch-registered company. Ingka Holding, in turn, belongs entirely to Stichting
Ingka Foundation, a Dutch-registered, tax-exempt, non-profit-making entity, which was given Mr Kamprad's IKEA shares in 1982.
Kilde: The Economist February 26th 2011
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The secret of IKEA's success
After the airing of the polemical documentary on Swedish TV, Mr Kamprad retorted that
"tax efficiency" was a natural part of the company's low-cost culture.
Yet such diligent efforts to reduce the firm's tax burden sit uncomfortably with IKEA's socially conscious image.
Mr Ohlsson is trying to defuse criticism of IKEA's opacity by providing more information on its finances.
Last year the firm published detailed figures on sales, profits, assets and liabilities for the first time ever.
Kilde: The Economist February 26th 2011
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Tax Governance: Why?Also an interesting topic in Danish media
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Samfundet kræver oplysning og transparens
Business.dk 12. oktober 2010
Dr.dk 11. oktober 2010
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Et år senere ……..
Kilde: Børsen den 25. marts 2011
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Latest trends
Globally/OECD: Double taxation
Model Tax Convention in respect of avoidance of double taxation
Transfer pricing guidelines
Aggressive tax planning (02/2010 "Tackling aggressive tax planning through improved transparency and disclosure")country by country
"Country-by-country reporting" for multinational (listed) companies (OECD)
Extractive Industries Transparency Initiative (EITI)
IFRS: IAS 12 discussion paper
EU: "A Transparent and Cooperative International Tax Environment" (06/2010)
"Country-by-country reporting" (exposure draft 10/2010)
Disclosures in the financial statements (particularly extractive companies
and the financial sector) (IFRS 6) by country:
Revenue (intra-group and extra-group)
Number of employees
Profit/loss before tax (sub-consolidation?)
Paid taxes (or otherwise paid to the State)
Other disclosures of the relation between the company and the host nation
Other
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Latest trends
USA
"Country-by-country reporting" for listed companies in raw material extraction (key figures)
Disclosures of "uncertain tax positions" (UTP) in the financial statements, Sept. 24, 2010
"Only businesses with $100 million or more
in Assets are required to report uncertain
tax positions reflected in their financial
statement income tax reserves."
UK
Senior Accounting officer regulation
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Tax comes out of the box: New UK legislation
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UK legislation making the Senior Accounting Officer (the SAO -usually the CFO or finance director) of any large company:
"personally responsible for certifying that the tax systems in their organisation are fit for purpose".
The SAO must certify that:
■ policies and
■ procedures for managing tax compliance in each qualifying company for which they have responsibility
■ are adequate and managed by appropiate people.
If this is not the case, the SAO needs to show that action is being taken to rectify any problems.
Tax GovernanceTax comes out of the box: SAO personally responsible
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Tax GovernanceTax compliance is a board responsibility
"Tax authorities are using these regulations to reinforce the view that:
■ Tax compliance is a Board responsibility,
■ not just a matter for the tax department".
"They are making tax processes a finance matter.
Tax and finance people have to work together under Board supervision to ensure that liabilities are:
calculated and
reported
correctly".
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Tax GovernanceTax in the boardroom: evidence of a risk-based, methodical analysis of the tax issues within an organisation
HMRC is looking for evidence of a risk-based, methodical analysis of the tax issues within an organisation, focusing on:
■ identifying what risks exist,
■ whether appropiate action is being taken to deal with them, and
■ whether this process has been carried out to a level of materiality that is relevant to the size of the tax stream under consideration.
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Tax GovernanceSAO certification - problems
"In practice problems tend to arise with taxes
■ on employment,
■ VAT,
■ environmental taxes,
■ stamp duty, and
■ transfer pricing,
where much of the information leading to the final tax calculation is being provided by people who are not tax specialists.
Tax in these areas is complex and it is easy to make a mistake".
Board-approved plan
"Getting endorsement from the Board is possibly the most important part of the whole procedure".
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Tax Governance"Dirty" better than "clean"
Senior finance executives concluded that in order to demonstrate clearly that they and their Boards have done a thorough job assessing their tax arrangements, they would choose not to submit a clean certificate.
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Tax GovernanceBoard responsibilities
To satisfy yourself that your company:
■ has a robust tax risk management system, and
■ is meeting its obligations under the SAO legislation,
you might want to consider whether you have seen:
■ The Board being engaged with discussions on tax
■ An SAO1) plan endorsed by the Board
■ Board agreement on level of tax risk it is prepared to accept
■ Details of what your company's tax risks are, and where they lay
1) Senior Accounting Officer
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Anbefalinger for god selskabsledelse - Risikostyring
8 Identifikation af risici
8.1.1. Det anbefales, at det centrale ledelsesorgan mindst én gang årligt identificerer de væsentligste forretningsmæssige risici, der er
forbundet med realiseringen af selskabets strategi og overordnede mål samt
risici i forbindelse med regnskabsaflæggelsen
8.1.2. Det anbefales, at direktionen løbende rapporterer til det øverste ledelsesorgan om
udviklingen inden for de væsentlige risikoområder og
overholdelsen af evt. vedtagne politikker, rammer m.v.
med henblik på, at det øverste ledelsesorgan kan følge udviklingen og træffe de nødvendige beslutninger.
Kommentar: Rapporteringen til det øverste ledelsesorgan kan bl.a. omfatte tiltag og handlingsplaner, som kan acceptere, eliminere, øge, reducere eller dele disse risici.
Hvor væsentligt bør der rapporteres til den øverste ledelse (Anbefaling 8.1.2) om:
udviklingen inden for :
skat inkl. "compliance", væsentlige, aktuelle eller potentielle skatterisici og/eller skattesager
overholdelse af evt. vedtagne politikker, rammer m.v., herunder
Tax Governance Charter/skattepolitik/-strategi m.v.
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Revisionsudvalg skal overvåge, om virksomhedens interne kontrolsystem, eventuelle interne revision og risiko-styringssystemer fungerer effektivt (RL § 31, stk. 2, nr. 2)
Organisationsstruktur
■ Intern kontrol-setup
Bestyrelsesgodkendte retningslinjer m.v.■ Code of Conduct/Code of Ethics /CSR
■ Risikostyring (COSO)
■ Forretningsgange og intern kontrol (minimumskrav)
(f.eks. the 4-eye-principle m.v.) (COSO)
■ Krav til autorisation, godkendelse, attestation m.v.
■ Finans-/treasurypolitik
– It-strategi / it-sikkerhedspolitik
– Skattestrategi /skattepolitik /Tax Governance
■ Intern revision ? (refererer til revisionsudvalg)
■ Whistleblower-politik ?
■ Andre politikker
Direktionsgodkendte retningslinjer m.v.■ Regnskabs- og rapporteringsmanualer
■ Risikostyring (metode/proces) (COSO)
■ Forretningsgange og intern kontrol (minimumskrav)
(4-eye-principle) (COSO)
■ Krav til autorisation, godkendelse, attestation m.v.
■ Controlling (refererer til direktionen)
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Tax Governance og samfundsansvar - CSR
Redegørelse for samfundsansvar (ÅRL § 99a) (Dansk lovgivning i 2009) I lovpligtig redegørelse oplyses:
– Politikker
– Hvordan politikker omsættes til handling
– Vurdering af, hvad der er opnået, samt forventninger
– Har selskabet ikke politikker for samfundsansvar, skal det blot oplyses i ledelsesberetningen
Komitéen for god selskabsledelse
– Anbefaler at vedtage politikker for samfundsansvar (2.2.1.)
■ Herved omfattes selskaberne af ÅRL § 99a
■ Ikke yderligere oplysningskrav
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Income tax - IAS 12
The Accounting Standards Board (ASB) and European financial Reporting Advisory Group (EFRAG) have published a discussion paper on the financial reporting of income tax under IAS 12 "Income taxes" and how it could be improved.
Proposals include,
1. Possible changes to the reconciliation of tax expense
2. Revisions to the requirements in resepect of uncertain tax positions
3. Whether deferred tax should be discounted
The paper also discusses alternative approaches that could form the basis for a new standard to replace IAS 12.
The paper is open for comment until 29 June 2012
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Tax Governance CSR (Corporate Social Responsibility)
Increased focus on CSR (and tax) globally requires that special attention must be given to tax issues and governance also in relation to CSR.
Important questions:
How is tax included in the enterprise's CSR strategies and reporting?
Standards?
Documentation of the enterprise's reporting?
Connection:
CSR reporting and
Financial statements
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Tax GovernanceCompliance with laws and regulations, tax planning, etc.
Policy/guidelines for: Compliance with laws and regulations
Tax planning, "tax optimisation", etc., including general framework
Requests for "binding replies", etc., from tax authorities
Use of tax consultants, etc., and/or tax opinions
Collaboration with authorities
Replies to tax inquiries
Treatment of tax cases
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Tax GovernanceOrganisational procedures, tax department, etc.
Management embedding of tax (e.g. in the Executive Board)
Organisational position of those responsible for tax, a possible tax department and its management in the group and in the group's subsidiaries
How are qualified professionals attracted, retained and developed (upskilled) at different levels in the group?
When, to whom and how are tax and tax risks reported in the company/group, including to the Executive Board, Board of Directors/Audit Committee?
Tax department
Must a tax department be established?
To whom will the tax department be responsible?
How will the tax department be managed and staffed (tax qualifications)?
What will a possible tax department be responsible for and involved in?
Day-to-day operations/transactions/structuring
The function of the tax department in relation to subsidiaries and their tax position?
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Tax GovernanceIncome tax return and financial reporting
Income tax return, etc.
Preparation
Quality control
Submission/filing
Transfer pricing documentation (defence file) in relation to intra-group transactions and other relevant documentation
Financial reporting (financial statements, interim reports, etc.)
Reporting
Compliance
Tax risks, etc. (uncertain tax positions)
Summary, including valuation of deferred tax, etc. (tax risks)
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Tax GovernanceFinancial reporting/IFRS/IAS 12
How and on what basis are the following items recognised in the financial statements?
Tax (current and paid)
Deferred tax
Deferred tax assets, including valuation allowance, basis
Provision for tax risks, including interest and/or fines, etc.?
Documentation of accounting estimates regarding deferred tax assets, tax risks, outcome of tax cases, etc.
Compliance in relation to IFRS?
Prepared for:
Country-by-country reporting, etc.
Uncertain tax positions, etc. (UTP)
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Tax Governance - Conclusion
Increased focus on tax
Openness and transparency, CSR and good citizenship
Involvement of those charged with governance
Tax must comply with the general principles of corporate governance:
Good corporate governance and
Good tax governance
are gaining ground!
OECD Principles of Corporate Governance VI. The Responsibilities of the Board:
"Another important board responsibility is to oversee systems designed to ensure that the
corporation obeys applicable laws, including TAX, competition, labour, environmental,
equal opportunity, health and safety laws."
Denne præsentation indeholder alene en generel gennemgang af et emne, som KPMG efter aftale kan yde nærmere rådgivning om. Selvom fejl og mangler i præsentationen er forsøgt undgået, kan KPMG ikke påtage sig noget ansvar for dispositioner, som foretages uden vores forudgående rådgivning.
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