KPMG Nigeria Tax Risk Management Survey 2015
As a result of changing regulatory and fiscal landscape, “getting tax right” is significantly important for all companies operating in Nigeria. Global regulations and wider awareness of corporate governance issues have also made it an imperative for companies to address all aspects of risks in their business.
Organizations therefore need to understand and manage tax risks, just as all other aspects of enterprise and business risks facing their business, in order to enhance tax cost optimization, improve business performance, and create shareholder value.
We are pleased to present the findings from the maiden edition of KPMG Nigeria’s Tax Risk Management Survey. In the survey, we have sought to identify attitudes, trends and benchmarks to the following fundamental issues:
- The role of strategy in the tax department’s operations
- Businesses consciousness towards tax risk management
- Attaining the ideal tax operational environment
- Driving efficiency through tax processes and control improvements
The Tax Department and Role of Strategy
The starting point in managing and controlling a group’s tax should be to define its tax strategy. Tax strategy is a plan of action, which an organization seeks to take to achieve its tax objectives. The Tax Director / Head of Tax (HoT) needs to set out the principal objectives, all of which should tie into the underlying business objectives. Laying out the tax function’s objectives in a tax strategy document ensures that they are communicated to and understood by the Board/ Executive Management, other stakeholders and employees whose activities impact tax numbers.
What is the role of the tax department?
When asked about the main objective of their tax function, many of the respondents indicated this to be managing tax compliance-related activities.
However, the objectives for which a tax department is set up should go beyond mere compliance management. An effective tax department has evolved into a function that focuses more on adding value to various aspects of business. It includes efficient tax planning, effective tax risk management, establishing strong tax control environments, proactively engaging tax authorities and tax professionals on issues which are not so clear and may have significant impact on business decisions, etc
Another area of concern is that even where formal tax objectives exist, they are not communicated to those that handle tax transactions outside the tax department e.g. sales operations teams in field offices who handle Value Added Tax (VAT) / Withholding Tax (WHT) on transactions. The excluded teams are often responsible for transactions that generate a significant proportion of the overall taxes in an organization. The exclusion of the ‘shadow tax teams’ therefore leads to sub-optimal implementation of the tax strategic plan.
The above is an excerpt from KPMG Nigeria’s Tax Risk Management Survey 2015. Please feel free to download.