Tax Steering Committee - Academy of Tax Law

A Tax Steering Committee is a specialised governance group within an organisation responsible for overseeing and guiding the company’s tax strategy and operations. It typically includes senior executives such as the Chief Financial Officer (CFO), Head of Tax, General Counsel, and external tax advisorsA Tax Advisor is a professional who provides specialised advice to individuals, businesses, and organisations on various tax-related matters. They play a crucial role in guiding clients through complex tax laws and ensuring compliance with the latest regulations while identifying opportunities for tax efficiency. Tax Advisors must stay updated on legislative changes and understand the impact of international tax treaties,... or auditors. In multinational corporations (MNCs), this committee becomes particularly crucial, given the complex tax environment spanning multiple jurisdictions and regulatory frameworks.

The Tax Steering Committee serves as a strategic and operational hub for all tax-related matters. Its primary role is to ensure that the organisation’s tax activities align with its overall business strategy and financial objectives while also adhering to global and local tax lawsTax laws form the backbone of any nation’s revenue system, setting the rules that govern how individuals and corporations contribute financially to support government functions. These laws define the types of taxes, the applicable rates, and the regulations regarding payment and compliance. They also outline the rights and obligations of taxpayers, ensuring a balanced and fair approach to funding public.... This committee develops, reviews, and approves tax policies, evaluates tax risksTax Risk refers to the uncertainty surrounding the potential financial or reputational impact of tax-related decisions and events on a business or individual. This risk arises due to various factors, such as complex tax regulations, inconsistent tax authority interpretations, or evolving international tax laws. Effective tax risk management involves identifying, assessing, and mitigating potential tax-related threats to prevent financial penalties,..., and ensures compliance across jurisdictions. Furthermore, it functions as a strategic partner to other departments, such as finance, operations, and legal, to provide tax input on significant business decisions.

The responsibilities of a Tax Steering Committee are multifaceted and often include:

Strategic Tax PlanningTax planning is the process of organising and structuring one’s financial affairs in a manner that legally minimises tax liabilities while ensuring compliance with relevant tax laws. The primary objective of tax planning is to reduce the amount of taxes paid, optimise the use of available tax benefits, and preserve wealth. It can be applied at various levels, including personal...: Developing forward-looking tax strategies to optimise the organisation’s tax position. This may involve planning for mergers, acquisitions, restructurings, or capital investments in a tax-efficient manner.
Risk Management: Assessing and mitigating tax risksTax Risk refers to the uncertainty surrounding the potential financial or reputational impact of tax-related decisions and events on a business or individual. This risk arises due to various factors, such as complex tax regulations, inconsistent tax authority interpretations, or evolving international tax laws. Effective tax risk management involves identifying, assessing, and mitigating potential tax-related threats to prevent financial penalties,..., including those arising from new legislation, tax auditsA Tax Audit is a comprehensive review or examination conducted by a government’s tax authority. The primary objective of a tax audit is to verify the accuracy of a taxpayer's financial records, tax returns, and overall tax compliance. This process ensures that the reported income, expenses, and deductions align with the applicable tax laws and regulations. Tax audits serve as..., or aggressive tax positions. The committee is tasked with ensuring the company’s risk appetite is consistent with its tax strategy.
Transfer PricingTransfer pricing is a fundamental concept in international taxation that defines the pricing methods and rules applied to transactions between related entities within a multinational enterprise (MNE). In the context of tax regulations, it governs how prices for goods, services, or intangibles (such as intellectual property) are set when these items are exchanged between different branches, subsidiaries, or affiliates of... Management: Given the heightened scrutiny on intercompany transactionsIntra-Group Transactions are interactions between entities within the same multinational enterprise (MNE). Such transactions form the backbone of related-party dealings and are essential in managing global operations and aligning business objectives across jurisdictions. Understanding intra-group transactions is critical in international tax and transfer pricing, as they directly impact a company's tax obligations, profitability, and compliance standing. Tax professionals, accountants, lawyers,..., the committee ensures that the company’s transfer pricing policiesTransfer Pricing Policies refer to the rules and methods established by multinational enterprises (MNEs) to determine the pricing of transactions between related parties, such as subsidiaries or divisions of the same company. These transactions may involve the transfer of goods, services, intellectual property, or financial arrangements. Transfer pricing policies are essential for ensuring that intercompany transactions adhere to the arm’s... are robust, compliant, and well-documented. This involves overseeing the preparation of transfer pricingTransfer pricing is a fundamental concept in international taxation that defines the pricing methods and rules applied to transactions between related entities within a multinational enterprise (MNE). In the context of tax regulations, it governs how prices for goods, services, or intangibles (such as intellectual property) are set when these items are exchanged between different branches, subsidiaries, or affiliates of... documentation and engaging with tax authorities as needed.
Compliance and Reporting Oversight: Monitoring the organisation’s adherence to tax complianceTax Compliance refers to the adherence of individuals and businesses to the tax laws and regulations of a specific jurisdiction. It encompasses the timely and accurate filing of tax returns, the payment of tax liabilities, and ensuring that all tax-related obligations are met as stipulated by legislation. Compliance involves more than just submitting tax forms; it includes maintaining accurate financial... obligations, both locally and internationally. This involves regular reviews of tax filingsA Tax Return is a formal statement filed by an individual or entity that details income, expenses, and other pertinent tax information to a tax authority. Its primary purpose is to assess tax liability, determine refunds owed, or highlight outstanding taxes due. Tax returns may include information about earnings, capital gains, allowable deductions, and credits, depending on the tax regulations..., ensuring the accuracy of financial statements concerning tax provisions, and managing tax reporting under International Financial Reporting Standards (IFRS) or Generally Accepted Accounting Principles (GAAP).
Engagement with Tax Authorities: Acting as the liaison between the organisation and tax authorities, especially during audits or investigations. The committee formulates strategies for audits, manages information requests, and negotiates with tax authorities to resolve disputes.
Policy Development: Creating a framework for tax policy that addresses emerging tax trends and legislative changes, ensuring the company is compliant and prepared for future challenges.

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Driving Tax Compliance: The Essential Role of the Tax Steering Committee.

Practical Examples of a Tax Steering Committee in Action

Example 1: Managing a Complex Cross-Border Merger

Imagine a multinational corporation headquartered in the United Kingdom that is planning to acquire a manufacturing firm based in Germany. The acquisition involves complex cross-border tax implications, such as withholding taxes, capital gainsCapital gains refer to the profit earned when an asset, such as real estate, stocks, bonds, or even a collectible, is sold or exchanged for a price that exceeds its original purchase cost. These gains are a critical component of personal and corporate finance, as they influence investment strategies and tax obligations. Capital gains are realised when an asset is... taxes, and the integration of the target company’s existing tax liabilities into the acquirer’s structure. The Tax Steering Committee plays a pivotal role in this scenario by conducting a comprehensive tax due diligence process. They assess the tax risksTax Risk refers to the uncertainty surrounding the potential financial or reputational impact of tax-related decisions and events on a business or individual. This risk arises due to various factors, such as complex tax regulations, inconsistent tax authority interpretations, or evolving international tax laws. Effective tax risk management involves identifying, assessing, and mitigating potential tax-related threats to prevent financial penalties,..., devise strategies to mitigate exposure, and structure the deal to achieve optimal tax efficiency. For instance, they may recommend using a holding company in a jurisdiction with favourable tax treaties or consider the impact of the EU Anti-Tax Avoidance Directive (ATAD). By meticulously planning, the committee ensures the transaction proceeds smoothly without unexpected tax liabilities, providing long-term financial benefits to the company.

Example 2: Proactive Response to Global Tax Reforms

Consider a scenario where a multinational tech company is heavily impacted by the OECD’s Base Erosion and Profit ShiftingBEPS stands for "Base Erosion and Profit Shifting". BEPS refers to tax avoidance strategies used by multinational enterprises (MNEs) to exploit gaps and mismatches in the international tax system. By shifting profits from high-tax jurisdictions to low- or no-tax locations, MNEs reduce their overall tax burden, even if little to no economic activity occurs in the low-tax jurisdictions. These practices erode... (BEPSBEPS stands for "Base Erosion and Profit Shifting". BEPS refers to tax avoidance strategies used by multinational enterprises (MNEs) to exploit gaps and mismatches in the international tax system. By shifting profits from high-tax jurisdictions to low- or no-tax locations, MNEs reduce their overall tax burden, even if little to no economic activity occurs in the low-tax jurisdictions. These practices erode...) measures, specifically regarding transfer pricingTransfer pricing is a fundamental concept in international taxation that defines the pricing methods and rules applied to transactions between related entities within a multinational enterprise (MNE). In the context of tax regulations, it governs how prices for goods, services, or intangibles (such as intellectual property) are set when these items are exchanged between different branches, subsidiaries, or affiliates of... and profit allocation. Upon the introduction of BEPSBEPS stands for "Base Erosion and Profit Shifting". BEPS refers to tax avoidance strategies used by multinational enterprises (MNEs) to exploit gaps and mismatches in the international tax system. By shifting profits from high-tax jurisdictions to low- or no-tax locations, MNEs reduce their overall tax burden, even if little to no economic activity occurs in the low-tax jurisdictions. These practices erode... Actions 8-10, the Tax Steering Committee evaluates the company’s existing transfer pricingTransfer pricing is a fundamental concept in international taxation that defines the pricing methods and rules applied to transactions between related entities within a multinational enterprise (MNE). In the context of tax regulations, it governs how prices for goods, services, or intangibles (such as intellectual property) are set when these items are exchanged between different branches, subsidiaries, or affiliates of... model to ensure compliance. They identify intercompany transactionsIntra-Group Transactions are interactions between entities within the same multinational enterprise (MNE). Such transactions form the backbone of related-party dealings and are essential in managing global operations and aligning business objectives across jurisdictions. Understanding intra-group transactions is critical in international tax and transfer pricing, as they directly impact a company's tax obligations, profitability, and compliance standing. Tax professionals, accountants, lawyers,..., such as royalties paid to a subsidiary in a low-tax jurisdiction, and adjust pricing to meet the arm’s length principle. The committee also oversees the implementation of country-by-country reporting (CbCR) and ensures that all relevant documentation is up to date. By proactively aligning the company’s tax practices with international standards, the committee avoids hefty fines and reputational damage, positioning the company favourably with tax authorities worldwide.

Example 3: Addressing a Transfer PricingTransfer pricing is a fundamental concept in international taxation that defines the pricing methods and rules applied to transactions between related entities within a multinational enterprise (MNE). In the context of tax regulations, it governs how prices for goods, services, or intangibles (such as intellectual property) are set when these items are exchanged between different branches, subsidiaries, or affiliates of... Audit

In another example, a global pharmaceutical company faces a tax auditA Tax Audit is a comprehensive review or examination conducted by a government’s tax authority. The primary objective of a tax audit is to verify the accuracy of a taxpayer's financial records, tax returns, and overall tax compliance. This process ensures that the reported income, expenses, and deductions align with the applicable tax laws and regulations. Tax audits serve as... in France, where the local tax authorities are scrutinising the company’s transfer pricingTransfer pricing is a fundamental concept in international taxation that defines the pricing methods and rules applied to transactions between related entities within a multinational enterprise (MNE). In the context of tax regulations, it governs how prices for goods, services, or intangibles (such as intellectual property) are set when these items are exchanged between different branches, subsidiaries, or affiliates of... arrangements between its French subsidiary and its Swiss parent. The authorities allege that the prices for intra-group transactionsIntra-Group Transactions are interactions between entities within the same multinational enterprise (MNE). Such transactions form the backbone of related-party dealings and are essential in managing global operations and aligning business objectives across jurisdictions. Understanding intra-group transactions is critical in international tax and transfer pricing, as they directly impact a company's tax obligations, profitability, and compliance standing. Tax professionals, accountants, lawyers,... were not set at arm’s length, potentially reducing the tax baseThe tax base is a fundamental concept in taxation, representing the total amount of economic activity or assets upon which a tax is levied. It is the foundation upon which governments calculate the amount of tax owed, based on factors like income, property value, sales, or corporate profits. Understanding the tax base is essential for tax professionals, businesses, and policymakers,... in France. The Tax Steering Committee springs into action, coordinating a robust defence strategy. They compile extensive documentation to support the pricing of intercompany transactionsIntra-Group Transactions are interactions between entities within the same multinational enterprise (MNE). Such transactions form the backbone of related-party dealings and are essential in managing global operations and aligning business objectives across jurisdictions. Understanding intra-group transactions is critical in international tax and transfer pricing, as they directly impact a company's tax obligations, profitability, and compliance standing. Tax professionals, accountants, lawyers,..., engage external transfer pricingTransfer pricing is a fundamental concept in international taxation that defines the pricing methods and rules applied to transactions between related entities within a multinational enterprise (MNE). In the context of tax regulations, it governs how prices for goods, services, or intangibles (such as intellectual property) are set when these items are exchanged between different branches, subsidiaries, or affiliates of... experts, and lead negotiations with the tax authorities. By leveraging their expertise, the committee navigates the audit process, ultimately achieving a favourable settlement that minimises financial penalties and disruption to the business.