The management of tax risks, meeting the tax compliance deadlines and accuracy of tax returns & avoidance of penalties are the major concerns of many tax executives

Cyber Security risk, tax risk and regulatory risk are top three complex area for many of the companies which have been identified by many business leaders in recent times. Potential tax reform programs by tax jurisdiction, uncertain global tax environment, unresolved issues surrounding the taxation of digital companies, and the likely increase in taxes of COVID impact etc could be the confluence of factors that contribute to tax risk to growth. The tax risk in turn will increase the cost of capital and may create the situation of deadlock to the marginal capital projects.

Tax authority always wears the spectacle of increased taxes (which of course needed by the government) though incentivizes through investment allowances and research & development expense to increase the investment. The cost of capital on the major projects can be calculated by proper analysis of potential tax reform and possible tax concessions which in turn could be the indicator of growth to business. At the same time there is challenge for the tax authority to capture the ambit of taxation and frame the tax rules in case of digital services having no physical presence of the entity. Also, COVID itself has given rise to an increase in tax risk in some areas.

The management of tax risks, meeting the tax compliance deadlines and accuracy of tax returns & avoidance of penalties are the major concerns of many tax executives which are becoming in the top radar of many business leaders as effective management of tax risks is one of the engines to growth. Leaders from top executive level including CEOs and the Board require to keep updated on the complex tax issues from their respective reporting channels. This has to be on a continuous basis rather than ad-hoc.

The following could be five measures that the tax leaders can take while managing the complex tax challenges.

• Stay connected with the tax regulators and updating their ongoing complexity and issues faced by the entity. This in turn will ease the policy makers to take the appropriate decisions to the need of business.
• Keeping abreast of tax policy framed by the government and dissemination of the updates on time to the stakeholders within the organization. This enhances the culture of timely update, and appropriate actions can be taken in due course.
• Develop a structure within the organization which encourages the effective implementation and compliances of tax deadlines along with accuracy in reporting to the tax authority.
• Devise a mechanism which creates the environment to discuss and resolve the complex tax issues taking the interpretation and opinion from the team of experts. Tax leaders along with team of experts are positioned to resolve the complex tax issues which will stimulate the business growth, and leaders can take their appropriate investment decisions.
• Set a clear policy on tax planning. The policy should be comprehensive, covering all aspects of tax planning, and discussed and agreed by the Board.

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