Corporate governance concerns the manner in which a board of directors oversees the running of a company by its managers and how the board members are, in turn, accountable to shareholders in terms of safeguarding the company’s assets and profitability.
Tax governance is corporate governance as it relates to tax; however, corporate boardS of directors may not historically have given tax governance the attention that it warrants in light of increasing tax-risk exposure that companies face. The key objective of tax governance is effective management of tax risk and tax disputes, so to enable stakeholders to protect their interests or discharge their responsibilities (when applicable) and to provide more efficient use of resources as well as unlocking of value tied up in unresolved tax issues.
Tax authority’s focus on tax risk
Specifically, the Inland Revenue Authority of Singapore (IRAS)—in relation to tax compliance by companies—has adopted a strategic compliance framework (based on the belief that taxpayers are generally compliant) that seeks enhanced cooperation and voluntary disclosure by companies.
The IRAS has adopted a risk-based approach in dealing with companies, using differentiated approaches / initiatives based on IRAS assessment of the companies’ tax risk profiles.
The IRAS thus launched a “co-creation process” to develop a tax risk management framework for Singapore. The framework is intended to provide effective tax-risk management and the intention is to put into place a framework that spans types of taxes—i.e., corporate income tax, employer payroll reporting, and goods and services tax (GST).
Read an August 2012 report [PDF 872 KB] prepared by the KPMG member firm in Singapore: Tax governance vis-à-vis recent tax risk management framework focus of the Inland Revenue Authority of Singapore