New corporate tax focus on minimising risk

A new report from Allen & Overy, based on a survey of 396 senior-level executives, marks the shift among large companies in their approach to tax planning, away from minimising tax and towards minimising tax risk.

The report, ‘Global Tax practice: Negotiating the minefield: managing tax risks in challenging times’, looks at how public anger about international tax avoidance has led to new legislation, tighter regulation and enforcement. It explores the way companies across the world are changing their relationship to tax authorities and tax advisors and looks at the potential impact of further reforms, including the OECD’s BEPS project and the EU anti-avoidance directive. There is ‘increasing uncertainty about what is considered compliant’, as regulators focus ‘on the spirit rather than the letter of the law’. The trend towards personal liability for tax directors, senior-level executives and advisors adds to this uncertainty.

In its conclusions, the report recommends:

·         tasking tax directors with full compliance, establishing a culture of sophisticated tax risk management;

·         keeping an eye on past structures, as authorities may apply current, stricter, standards to structures that were standard practice just a few years ago;

·         building a relationship of trust and transparency with tax authorities;

·         paying proper attention to BEPS, as country-by-country reporting and sharing of information come into effect; and

·         being agile and keeping in touch with tax changes, such as the new administration in the US and developments in Europe as the EU moves towards a common consolidated corporate tax base.