CFO buy-in critical for overall success
TORONTO, Nov. 16, 2011 /CNW/ - With converging trends creating the
riskiest tax controversy environment in years, 56% of Canadian
companies have already seen a rise in the volume or aggressiveness of
tax audits, Ernst & Young finds in a new survey. And C-suite executives
must understand the full implications to navigate this uncharted
"The financial crisis that's rocked the world in the last three years
has led to a new era of tax scrutiny as governments moved to deficit
financing to jump-start their economies, and companies expanded into
new markets with uncharted tax regimes to survive," explains Fred
O'Riordan, Ernst & Young national tax advisor. "What's important now is
how businesses and tax administrations react. The Canadian C-suite must
beware: prepare now to answer tough questions, or expose your business
to serious risk."
Ernst & Young's 2011-12 Tax risk and controversy survey: a new era of global risk and
uncertainty shows that 57% of all global companies interviewed saw the same
increases as the Canadian contingent. That number jumps to 75% for
large companies with revenues over $5 billion.
What's more, 97% of tax administrators interviewed globally will
increase their focus on tax risk related to international structures
and cross-border transactions in the coming three years. While 77% of
all companies agreed or strongly agreed that tax risk and controversy
management will become even more important to them, only 50% of all
CFOs subscribed to that same viewpoint.
"With the Canada Revenue Agency rolling out new projects focused
specifically on tax governance and risk management, we can expect more
scrutiny of companies' tax process, oversight and decisions. The CRA
has signaled it will also be looking for more C-suite involvement in
these discussions," O'Riordan says. "Tax needs a seat in the boardroom,
and CFOs must recognize that if a business is going to thrive in this
quickly changing world."
The survey report suggests a five-step approach to overall tax risk and
controversy management, which O'Riordan says is a good framework for
Canadian businesses and their C-suite to follow:
Adopt a global approach to tax risk and controversy management.
Evaluate resources, processes and systems for global tax risk
Address tax risk and controversy at a strategic level — and execute
Make strong corporate governance in tax a priority — because it is to
Stay connected with complex, voluminous and fast-paced change.
"The past few years have created a perfect storm in which businesses
cannot afford to be unprepared to handle authorities' questions.
Planning ahead — before businesses find themselves in the spotlight —
is the very best way to move forward," O'Riordan says.
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