Corporate governance seminar- Tax risk management policiesJoanne Dunne Andrew RyanPartner, MinterEllison Partner, MinterEllisonRuddWatts

24-25 February 2016

127350080Some photos courtesy freedigitialphotos.net

Overview of session Why have a tax risk management policy and why tax risk needs to be

dealt with at Board level Top three reasons to have a tax risk management policy International Developments: Australia, UK, OECD (EU will also be

touched on) Inland Revenue’s position Inland Revenue’s position Existing position Where we think NZ will head in future

Tax risk management policies What a policy should consider (top 5 tips) How to test its effectiveness

Questions / Discussion

Top three reasons to have a tax risk management policy A factor in tax audit selection by tax regulators Tax transparency laws and future law changes Existing (and potential new) director/officer penalties for failure by

company to pay tax

Developments in Australia

Centro and the role of the Board Tax Audit selection: The risk differentiation framework

Developments in Australia (continued)

ATO Tax risk management and governance review guide: July 2015 Tax transparency and tax risk reporting in Australia: The reportable tax position schedule The Senate Inquiry into Corporate Tax Avoidance (2015); Senate q y p ( )

inquiry into Tax Deductions (2016) Public disclosure of particular taxpayers and their total income,

taxable income and tax paid (first report issued in Dec 2015) Country-by-country reporting, the common reporting standard Voluntary Code of Tax Transparency

Tax penalties imposed on directors and officers – eg Director Penalty Regime

Developments in the United Kingdom

Tax Audit selection: Business Risk Review Assessment (TCRM3341) and the Senior Accounting Officer regime

Tax transparency and tax risk reporting in the UK: House of Lords inquiry into corporate tax avoidance (2013) House of Lords inquiry into corporate tax avoidance (2013) Code of Practice for Taxation for banks and large business Risk reporting measures “pay/report now, argue later”: eg DOTAS

and the Diverted Profits Tax (amongst others)

Developments in the United Kingdom (continued)

New transparency proposals from HMRC: Improving Large Business Tax Compliance (2015) – three proposals of note All businesses to publish their tax strategy – including governance

and risk framework, effective tax rate Named individual at Board level to be responsible for tax strategy –

public responsibility for that Board member Special Measures – behavioural notices with time limits

– an ASBO for business? Tax penalties imposed on directors/officers

Developments at the OECD

Base Erosion and Profit Shifting Project Transparency and tax risk reporting proposals include: Sharing rulings between tax authorities

C i t i d t t ti b t t th iti d Consistency in data retention between tax authorities and sharing data

Transfer pricing –eg country-by-country reporting Adopt mandatory disclosure rules like UK’s DOTAS

New Zealand – Inland Revenue’s position

[ANDREW TO DO] Transparency measures Country-by-country reporting 2017 (only impacts a small number

of companies in NZ)of companies in NZ) Why boards need to care about tax already (other than maximising

shareholder return): potential penalties on directors/officers – secs 141F, 143A, 147, 147B, 148 TAA

Top five tips for a tax risk management policy Focus on tax risk management being about shareholder return and

compliance Outline Board oversight of tax reporting – reporting lines to and from

the tax function and tax return sign-off, regular Board reports re tax risk/law changes Board induction into tax staff training as to the policyrisk/law changes, Board induction into tax, staff training as to the policy

Set out your business’ tax risk tolerance and processes to manage risk – how do you ensure tax positions taken are reasonably arguable?what is a material risk for your business? How does the tax function operate within your business?

Set out your relationship with Inland Revenue –your tax record keeping processes/data management, how you will manage Inland Revenue inquiries, who is responsible, Board involvement/sign off

Top five tips for a tax risk management policy (continued)

Establish processes for management of and testing of advice –ensure you do not just rely on one adviser all the time but test that advice, ensure advice is protected/privileged, and your data and document management processes are able to isolate that materialdocument management processes are able to isolate that material

Testing the effectiveness of a tax risk management policy Have a risk officer and have a semi-regular internal review of processes

(both the design and the effectiveness) Ensure that the directors and staff are upskilled

C id dditi l i l i d d t t l d i i f Consider additional irregular independent external adviser review of processes and reporting lines, tax risks, effectiveness – at fixed intervals

If there is no internal tax function, the controls and testing needs to demonstrate the methods the directors use to test and assess advice

Establish a Board risk committee for oversight Include the testing process you decide to adopt in your tax risk

management policy

Questions?

Contact details

Joanne Dunne Partnert +61 3 8608 2944 f +61 3 8608 1944 m +61 4 2189 7133 MinterEllison Rialto Towers 525 Collins Street Melbourne VIC 3000 joanne.dunne@minterellison.com www.minterellison.com

Andrew Ryan Partnert +64 9 353 9950 f +64 9 353 9701 m +64 21 606 170MinterEllisonRuddWatts Lumley Centre 88 Shortland Street Auckland 1010andrew.ryan@minterellison.co.nz www.minterellison.co.nz