Incorporating an effective risk management framework

The issue

The client, a multi-national logistics company, lacked a coherent internal structure for setting tax policies and objectives including tax risk management. Absent a solid tax risk management framework, the client was at risk of identifying worrisome tax matters too late and failing to calculate and report tax liabilities correctly.

Our approach

PwC was engaged to address these issues and help formulate a long-term tax strategy for the company. We began by conducting client interviews and an analysis of the company's business plans in order to clarify the company’s risk environment and general appetite for risk. We then built a tax risk “matrix” that mapped and prioritised tax risks associated with the company’s various business segments and regions. This matrix indicated the different areas of exposure for the company and their relevant importance in terms of reputation and potential direct profit impact. Additionally, in light of the tax risks faced by the company, PwC helped define new roles and responsibilities for company tax staff.

The outcome

In the final phase of our work, PwC helped our client communicate a revised tax strategy and risk management framework throughout the company’s organisation. Implementation of the tax risk management framework allowed the client to also identify tax exposures relating to VAT & customs representation activities, in addition to exposures on potential permanent establishment due to the presence of commercial staff at warehouses. Additionally, a monitoring system was created that led to the elimination of late filings. As an outcome of our approach, the client now has a framework in place with clearly identified roles and responsibilities including instructions on when and how to escalate issues up to appropriate management levels. The result: no more unpleasant surprises and full compliance with statutory, tax and accounting legislation.