Tax Management Maturity Model

A universal tool to determine the quality of the tax function and the tax control framework

PwC

‘Being demonstrably in control is actually not that complex.’ In 2005, PwC introduced its tax assurance practise in The Netherlands, with the tax control framework (TCF) concept as its central theme. We have brought about a fundamentally different approach to the practice of tax supervision and management. We think it is essential that not only the tax department must be assured of the quality of tax control but also the other stakeholders in and outside the organisation.

The Tax Management Maturity Model consists of the following stages:

stage 1: transparent overall view in 6 main groups (1A4!)

stage 2: detailed view of components and main groups

stage 3: objective view through detailed maturity level selection

stage 4: evidence and degree of assurance

Tax Management Maturity Model

There is a major need for clear frameworks and standards for tax. This is why PwC and Nyenrode University have developed the Tax Management Maturity Model. This is an (international) tool for determining the quality of the tax function and the TCF. The model is based on accepted models such as COSO and CobiT. It uses five maturity levels to show the extent to which an organisation exercises tax control and what the ambition level of the organisation is or should be. It is a universal, transparent model that shows in one sheet the compliance status of the entire organisation – a unique tool for self-diagnosis and communication with (international) supervisors and all internal and external stakeholders. The model is ideal for (international) benchmarking, scoping and developing a tax control environment. In its basic form, the model consists of four stages, as shown on the right.

Stage 1

Stage 2

Stage 3 Stage 4

2

PwC

Features of the Tax Management Maturity Model: The extent to which an organisation is in control of its tax function becomes transparent, verifiable, uniform and comparable. It is a universal, transparent dashboard that shows the compliance status in one sheet. The model comprises an ambition level and the growth path towards the designed maturity level. It is a unique tool for communicating with (international) stakeholders. The model is ideal for (international) benchmarking and agreements on tailor-made supervision (enhanced relationships etc.) The model is based on internationally accepted models such as COSO and CobiT. Taxation does not exist in a vacuum, so the model enforces an integral vision and organisation-wide approach. The model provides an objective view of the degree to which an organisation is in control of its tax function.

Tax MRI scan: The model allows you to work in small steps (project-based) on an MRI scan of tax management. It is recommended to repeat the scan regularly as organisations constantly evolve. This creates a closed cycle of inventory and analysis, underlying evidence, the overall status of the current situation, working on the ambition level and increasing assurance. It is a dynamic model focusing on diagnosis with underlying evidence. To reach the final conclusion - the degree of control - professional judgement is needed. Liaising with external control specialists and auditors can add assurance that the organisation is in control (tax assurance).

3

Inventory and analysis

Linking evidence

Overall status of current situation

Establish ambition level

Add assurance

PwC

Simplicity and detail… The tax management situation should be clear at a single glance. In order to provide detail, the model consists of four levels. The first level shows the current (or desired) situation. The second level provides more detail on the current situation. Level three comprises objective descriptions against which the organisation can compare itself (internal benchmarking). The fourth level provides evidence. A simple application is available for testing.

Stage 1: the overview

This level comprises of six main ‘drivers’ linked to five maturity levels: 1. Business (& Tax) Environment; 2. Business Operations; 3. Tax Operations; 4. (Tax) Risk Management; 5. Monitoring and testing; and 6. (Tax) Assurance.

Stage 2: detailed view

Points for attention are displayed for each main driver (stage 1). In the second stage, these drivers are shown in more detail in sub-categories.

We show here an example of the Business (& Tax) Environment driver. This main driver is divided into sub-categories. The application allows you to assign a maturity level to each sub-category.

Optionally, you can also indicate whether there is assurance (‘assurance’ column).

4

PwC

Objectivity and evidence… For the model to succeed as a tool for gauging the quality of tax function internationally, it will have to be used as objectively as possible. For this reason, every sub-category in the second stage is checked against objective descriptions in the third stage in order to establish the degree of maturity.

Stage 3: objective frameworks For each sub-category, there are objective descriptions of the maturity level that applies. The description that applies the most can be selected with a simple click. This choice will be shown automatically in stage 2. Evidence and reasons will be given for the final conclusion and added to the category concerned.

Stage 4: the evidence

The fourth stage is no more than a portal for accessing existing evidence. This is evidence for substantiating maturity levels and the degree of control. In fact, it is a filing cabinet containing the separate documents or links to the location of the evidence.

In brief: not a prelude to yet more administrative work but a simple portal to all the relevant evidence. A big advantage of this is that linking evidence has actually become tool and ICT-independent.

5

PwC

Example: Scan of current situation and ambition level

6

Project plan step 1

Project plan step 2

Project plan step 3

Project plan step 4

PwC

Example: International benchmark

7

3,3

83

,15

3,5

4

2,7

7

3,0

03

,38

Not rocket science, but certainly expertise

It seems a simple matter to calculate an overall score based on the maturity levels of the various sub-categories. However, this does not reflect the complex reality. Translating the detailed scores into overall scores is a step that requires expertise in all of the relevant fields. We’ll be happy to share that expertise with you!

Peter Chrenko peter.chrenko@cz.pwc.com

+420 251 152 600

Tomas Urbasek tomas.urbasek@cz.pwc.com

+420 542 520 255

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