While tax strategy, planning, and compliance do have immense intricacies, senior executives responsible for overall corporate strategy can rapidly follow tax concepts and need to draw out the business implications. Tax related decision almost always have bottom-line consequences and can also have considerable operational impact.
Most corporate performance metrics and bonus programs implicitly encourage executives to favour pre-tax income over other measures. These incentives direct their concern toward actions that increase sales and decrease operating costs and what could be more sensible? But does it also make sense to consider below-the-line tax costs as more or less fixed, beyond executive control?
Another approach to shareholder value can be very effective: taking steps to lower your company's overall effective tax rate ('ETR') through a group tax optimisation program that makes tax planning integral to corporate strategy and transformation. No longer relegated to the back office, tax planning becomes a vital influence on shareholder value by directly delivering financial benefits.
Revenue gains and tax saving are not, of course, mutually exclusive; both can produce similar increases to the after-tax bottom line. They approach the same destination from different directions. A slight reduction in the ETR can produce the same bottom-line impact as a significant increase in revenues. If a corporation can increase revenues and trim taxed, the net income impact is further magnified.
