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Effective tax risk management is more important than ever to tax executives, according to Ernst & Young.
The company's latest tax risk survey, Steady Course; Unchartered Waters, discovered that the majority of respondents spend up to 20% of their time on tax risk issues — and the percentage spending more than a fifth of their working day on tax risk issues has increased to 26% in 2008 from 16% in 2006.
The Ernst & Young study suggests that companies that have regular communication with their boards about tax risk issues are more likely to have specific measures in place to address those risks, and businesses whose boards hear about tax risk every quarter also more effectively use data collection and workflow technology.
Meanwhile, 77% of companies indicated that the lack of skilled or well-trained employees is a contributing factor to tax risk — and, as companies operate increasingly on a global basis, managing resources in overseas locations also becomes an issue.
"The global financial crisis and ever-changing regulatory environment have put pressure on companies to increase their focus on tax risk management,' said Ernst & Young's Mark Weinberger.
'Companies are forced to integrate tax risk management more closely with the enterprise as a whole. This goes beyond processes and controls and into areas of strategy, performance and communication.'
Sixty eight percent of the global study's respondents said that new or changing legislation is a major challenge to tax risk management.
'The expanding role of governments will only accelerate these pressures in coming years, as they seek to devise policies to enhance much needed revenues and provide a competitive environment for job and business creation,' said Mark Weinberger.
In this week's new issue of Taxation — available online from 10 December — Chris Chadburn looks at the work of risk intelligence analysis teams.
