Tax Function Effectiveness

Situation

Decisions made in response to market changes inevitably have tax implications. The impact these decisions have on financial performance and cash flows can be significant. In this situation, there is a steep rise in the role played by the “tax function”: a company’s business processes connected with taxation and human resources, as well as documents, procedures, regulations related to tax strategy, supporting business operations and satisfying tax liabilities.

Tax operational efficiency is currently of critical importance in the following two areas:

The first area involves business rationalisation and cost optimisation, which includes headcount optimisation, reduction of specific expense items, change and simplification of organisational and operational structure, spin-off and sale, liquidation of individual assets and operations, or suspension of business projects.

The second area covers liquidity and cash management, including debt refinancing, repatriation and reallocation of funds, settlement of accounts receivable and factoring, cash flow management and the treasury function.

Each of these areas is characterised by tax aspects that could considerably affect a business’s efficiency in the changing environment.

Measures of success

Thus, in the current economic conditions, the following objectives are of high priority:

• Focus on the tax function to ensure adequate evaluation and recognition of tax factors
• Taking into consideration tax aspects of arrangements aimed at business rationalisation and cost optimisation
• Regarding tax issues as a critical component of liquidity management.

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