Implementing the right tax control framework 

There are two main drivers for organisations looking for advice around tax control frameworks (TCFs). Sometimes it is a proactive strategy to check their tax affairs are in good shape or to better understand any potential liability risks, for example. Alternatively, they may already be aware of tax compliance issues they need to deal with and know a TCF can help them do that. 

Preparation 

No matter what the context, the starting point is the preparation phase. This is where we obtain a thorough understanding of the client’s situation. This begins with a preparatory meeting to explain what a TCF is, how it works and the general methodology. We’ll also discuss the client’s tax affairs, resources available and any particular issues they are concerned about. 

If the client decides to go ahead, the project proper begins with a kick-off meeting, involving all the relevant functions from the client’s business, to discuss in more detail its current tax and compliance management procedures and any areas of particular concern. 

It will usually involve one or two workshops, depending on the size of the organisation and the availability of managerial functions, to dive deeper into the scope of work and the client’s strategic priorities. It is also an opportunity for us to explain the expectations and requirements in terms of the documents and data the different functional areas will need to provide.  

The objective is to fully understand where the business has come from, its current situation, and where it is heading, strategically, so these realities can be reflected in a TCF that is based on the true needs of all relevant business functions.  

Analysis 

Next is the analysis stage. This where we analyse the various different areas of risk within the organisation, whether it’s overall risk compliance analysis, tax risk analysis, process analysis or something else. It will involve some more workshops and roundtables with senior managers across the various business functions, so we have a holistic view of the business’s situation.  

It will focus on the areas that the client has self-identified during the preparatory phase, plus the findings of our own analysis. Maybe an enterprise imports raw materials from Asia Pacific, processes them in the EU and distributes them to Latin America, for example. So, we’ll need to look at issues like duty, VAT, inbound taxes, outbound taxes, regulations, compliance requirements and so on. What should the invoice look like? How does interest need to be accounted for in the different jurisdictions? How are billing cycles managed? What kind of data needs collecting for ESG reporting requirements? How do the systems need to be set up to reflect all this?  

These issues not only affect the finance and tax functions, but also the sales function, the IT function, procurement function, production function, customer service function… there are so many things to consider from a compliance perspective, with many different departments involved. 

For organisations that have many different legal entities, we will cluster the entities into groups for the purposes of the TCF to reduce costs and improve efficiencies, rather than treating every entity in isolation from the rest. There will often be unnecessary compliance costs, duplication and over-complexity because that’s how things have evolved over time. The TCF will identify this and make recommendations to eliminate these inefficiencies and excess costs. 

Tax audits often take place years after a particular business year has closed, so the scope of the analysis will also look backwards when considering tax risks, as well as focusing on the current situation and how things might evolve in future, with new standards, regulations or requirements to meet.  

Implementation 

The final stage is finalisation or implementation. This is the end -product – a bespoke TCF for the business based on our findings. This will include areas for improvement and advice and guidance from our tax experts. Depending on the wishes of the client and the budget available, they can implement the findings of the TCF themselves, or we can work with them to do it. 

A typical TCF will include things like explaining how end-to-end processes need to be structured and managed, any documents or handbooks that need to be created, the data that needs to be collected, what training programs might be required for staff, where the IT system needs refining, for example. We provide advice on how this can be done over, say, the next 12 months, at which point, budget allowing, we will regroup and review progress. 

With a TCF in place, the organisation – and its senior management – have a high level of comfort that the key risks have been identified and they have an action plan to address them. It’s never possible to eradicate all risks, but if you know what the big risks are, you can tackle them proactively and manage them effectively.  

Discover more on how a tax control framework solution can benefit your business by visiting our dedicated TCF homepage, which has a collection of resources to support you on your tax journey.