Global Firms Attaching More Significance To Tax Risk Management

by Robert Lee, Tax-News.com, London

05 November 2004

A global survey conducted by accounting firm Ernst & Young has found that firms are becoming increasingly conscious of risk when conducting their tax affairs.

According to the survey of 350 firms around the world, 44% of those questioned have become more risk-averse in the past two years, keen to protect their reputations in a world much more conscious of corporate responsibilities, following a series of high-profile scandals, of which Enron is probably the most notable example.

E&Y observed that this change in emphasis was in marked contrast to the 1990s, when pressure on firms to deliver value for the shareholder forced tax departments to try to reduce tax rates.

The survey found that companies were now more keen to manage tax risk, such as tax rate volatility and compliance, rather than tax rates or cash flow.

"Companies still want to provide the greatest value for their shareholders, but not if they take a tax position that will cause havoc to their reputation," observed Mark Weinberger, director of E&Y's US tax practice, according to the Financial Times.

The importance of managing tax risk is also reflected in the number of tax-related decisions now being taken at boardroom level: one third of tax directors say they are responsible for approving tax risk policies, while two-thirds say they are receiving more direction compared with two years ago.

Recommended