Tax Risk Management All Too Often Under-Estimated In UK's Boardrooms

by Robert Lee, Tax-News.com, London

09 March 2006

The results of a recent survey by PricewaterhouseCoopers, the accounting and professional services firm, have suggested that too little emphasis is being placed on tax risk management in the boardrooms of British companies.

PwC says that responses from questions asked by the firm at a recent event on tax risk management show that many companies are still not embedding tax risk into their corporate strategy.

Despite the fact that over three-quarters (78%) of respondents believe that the level of tax risk has increased over the last couple of years, about two thirds of companies (64%) do not have a written tax risk policy or strategy that is signed off by the board.

Of the respondents that have perceived an increased level of tax risk, eight out of ten (79%) attributed this to a combination of changing attitudes of tax authorities, increasing complexity in tax law and an environment of increased change and uncertainty, according to PwC.

“These findings are concerning," observed Mark Schofield, corporate tax partner, PricewaterhouseCoopers LLP.

"On the one hand the tax function is very much aware of the need for greater transparency and effective and appropriate risk management for their tax affairs, while on the other hand it would appear that not enough is being done to ensure that tax risk is high enough on the business agenda," he added.

When questioned on the controls in place to manage tax risk within companies, 62% of respondents reported that they were only "reasonably confident" that the appropriate control exists in respect of all taxes paid, while 78% said that they are mostly, but not always, informed about their company’s activities and are able to effectively input on tax and tax risk to the board.

“The right tax risk policy will not only help reassure investors and other stakeholders that the company’s tax affairs are under control, but it will also enable the company to assess the value that can be achieved by taking risks," Mr Schofield noted.

"Companies need to look more closely at their own control environment and how they are going to identify and document tax risks and manage them going forward," he added.

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