On boarding the aeroplane I did the normal things one does on a long haul flight and introduced myself to the person next to me. I have a terrible fear of flying, so to calm myself I started pleasantries and we got to chatting about what we did and I was asked that question: “What do you do..?” I paused for a moment. My seat mate looked like they might be a rock star. I questioned whether this was the appropriate time to say that I was a rocket scientist or dolphin trainer, but I decided to come clean and admit I am a tax adviser.
This information elicited a totally unexpected sigh of relief and excitement. It turns out my new friend has real concerns over his organisation’s tax team. Every time there is a detailed technical issue, his team would always sway to the conservative, favouring the view of the Tax Office, and not put up a credible risk matrix for senior management and the board to consider.
We got to chatting a little bit further and it became obvious that the organisation did not have a clearly communicated framework outlining the risk parameters that the group were prepared to take from a tax perspective that was agreed to by both the board and the organisation’s Tax Group. In the absence of such a document it is very easy for a tax function to operate at cross purposes to senior management and the board.
The last thing that any Head of Tax wants is for their executive to lose confidence in the tax team’s ability to create value. In order to mitigate this risk, you should be asking a few important questions:
- does your organisation have a clearly defined tax risk strategy that is understood and implemented?
- does your executive think the tax function is creating value?
- how can you articulate what this value is?
We hit a little turbulence during the course of the flight and as a scared flyer I did the only logical thing, which was to order another drink. We agreed that we would meet after we both returned to Melbourne to talk about how an appropriate risk management strategy could be put in place to ensure that senior management and the board had confidence that the tax team were properly exploring all value.