Indirect tax function effectiveness: Formulating Indirect Tax strategy

When determining the tax strategy, we advise at least the following elements to be considered:

  • Tax function objectives
  • Alignment of the indirect tax strategy to the overall business strategy
  • Organizational model of the business vs. of the indirect tax function central vs. decentralised
  • Risk profile of the company and the tax risk profile
  • Scope of taxes covered
  • Entities covered
  • Tax roles & responsibilities
  • Tax resources internal & external
  • Possibly the tax strategy is detailed per tax role and/or applicable tax, either by formulating the specific strategy or detailing the tactics on how to achieve that strategy short term vs longer term.

Risk tolerance factors

In determining the Risk profile of the company, indirect tax risk tolerance factors can be formulated that must be applied to all significant transaction evaluation decisions. Factors we see included are:

  • Technical complexity of tax planning
  • Strength of external opinion
  • Complexity of implementation and maintenance
  • Downside risk and exit strategy
  • Potential benefit
  • Risk of law changes
  • Reputation risks
  • Size and impact of the transaction

via Indirect Tax Strategy Framework /Richard Cornelisse

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