Description
This is a document explaining tax risk, Transaction risk, Operational risk, Compliance risk, Tax risk management, Control environment, Information and communication, Monitoring
Banking & Financial Services
Assignment Topic: Tax Risk
Tax risk The decisions, activities and operations undertaken by an organisation give rise to various areas of uncertainty – business risks. Some of these uncertainties will be in respect of tax. These tax uncertainties may be in relation to the application of tax law and practice to particular facts, or it may be uncertainty as to how well systems operate to arrive at the tax results of the business activities and operations. These uncertainties give rise to tax risk. Tax risk can arise due to other specific risks which can affect taxes viz: transactional risk, Operational risk and Compliance risk Transaction risk: In any transaction there may be uncertainty as to how the relevant tax law will apply and uncertainty arising from specific judgement calls – particularly in the more complex areas. Additionally tax risks can also arise if the tax department is not involved in the transaction or are brought in only at the last minute. Operational risk: Operational risk concerns the underlying risks of applying the tax laws, regulations and decisions to the routine every day business operations of a company. Different types of operation will have different levels of tax risk associated with them. Compliance risk: Compliance risk concerns the risks associated with meeting an organisation’s tax compliance obligations. Tax compliance risk also includes the risks arising from agreement of tax returns and from enquiries on, or the audit of, submitted tax returns by fiscal authorities. Public/Private banks operating in many different international jurisdictions face many foreign tax laws which increase compliance demands and hence can cause tax risks. Tax risk management: The COSO Internal Control Integrated Framework In the early 1990s the Committee of Sponsoring Organisations of the Treadway Commission (COSO), set up in the US, called for a study to develop a framework for internal control and in 1992 the Internal Control – Integrated Framework was published. Today the most widely recognised international standard for an integrated framework of internal control is the COSO Framework Components of internal control 1. Control environment 2. Risk assessment 3. Control activities 4. Information and communication 5. Monitoring
Control environment: The control environment is the overall tone of an organisation – the culture and atmosphere of the organisation in which people conduct their activities and carry out their responsibilities; this is the attitude and culture of the board and senior management towards tax risk and their overall strategy and objectives for tax risk. This will include their commitment to tax risk management, the degree to which tax risk policies are set and communicated and the level of accountability for achieving and monitoring the performance of those policies. Risk assessment This is the awareness and response of the organisation to the different types of tax risk facing the organisation. This will include the organisation’s processes and procedures for identifying and evaluating the tax risks and how those risks are managed and mitigated consistent with the overall objectives of the organisation on tax risk. Control activities These are the detailed procedures and processes that have been designed and established to manage the tax risks identified in the risk assessment. The design and operation of control activities should ensure that the tax risks are managed in order to achieve the organisation’s tax risk objectives. Information and communication This is the information and communication necessary to ensure the organisation’s objectives in respect of tax risk are documented and communicated to the relevant people. It will include the operating policies and procedures within the organisation that are necessary to ensure all tax risks are identified and quantified and that the controls designed to manage those risks are documented. Monitoring These are the procedures put in place to review the effectiveness of the operating of the internal controls over tax risks, and to enable conclusions on the effectiveness of the controls over taxes to be reached. References http://www.deloitte.com/view/en_CH/ch/industries/financialservices/privatebankingcentreofe xcellence/positivegovernanceintoughtimes/taxriskassessment/index.htm http://www.pwc.com/en_GX/gx/tax-management-strategy/pdf/tax-risk-managementguide.pdf
doc_197430947.docx
This is a document explaining tax risk, Transaction risk, Operational risk, Compliance risk, Tax risk management, Control environment, Information and communication, Monitoring
Banking & Financial Services
Assignment Topic: Tax Risk
Tax risk The decisions, activities and operations undertaken by an organisation give rise to various areas of uncertainty – business risks. Some of these uncertainties will be in respect of tax. These tax uncertainties may be in relation to the application of tax law and practice to particular facts, or it may be uncertainty as to how well systems operate to arrive at the tax results of the business activities and operations. These uncertainties give rise to tax risk. Tax risk can arise due to other specific risks which can affect taxes viz: transactional risk, Operational risk and Compliance risk Transaction risk: In any transaction there may be uncertainty as to how the relevant tax law will apply and uncertainty arising from specific judgement calls – particularly in the more complex areas. Additionally tax risks can also arise if the tax department is not involved in the transaction or are brought in only at the last minute. Operational risk: Operational risk concerns the underlying risks of applying the tax laws, regulations and decisions to the routine every day business operations of a company. Different types of operation will have different levels of tax risk associated with them. Compliance risk: Compliance risk concerns the risks associated with meeting an organisation’s tax compliance obligations. Tax compliance risk also includes the risks arising from agreement of tax returns and from enquiries on, or the audit of, submitted tax returns by fiscal authorities. Public/Private banks operating in many different international jurisdictions face many foreign tax laws which increase compliance demands and hence can cause tax risks. Tax risk management: The COSO Internal Control Integrated Framework In the early 1990s the Committee of Sponsoring Organisations of the Treadway Commission (COSO), set up in the US, called for a study to develop a framework for internal control and in 1992 the Internal Control – Integrated Framework was published. Today the most widely recognised international standard for an integrated framework of internal control is the COSO Framework Components of internal control 1. Control environment 2. Risk assessment 3. Control activities 4. Information and communication 5. Monitoring
Control environment: The control environment is the overall tone of an organisation – the culture and atmosphere of the organisation in which people conduct their activities and carry out their responsibilities; this is the attitude and culture of the board and senior management towards tax risk and their overall strategy and objectives for tax risk. This will include their commitment to tax risk management, the degree to which tax risk policies are set and communicated and the level of accountability for achieving and monitoring the performance of those policies. Risk assessment This is the awareness and response of the organisation to the different types of tax risk facing the organisation. This will include the organisation’s processes and procedures for identifying and evaluating the tax risks and how those risks are managed and mitigated consistent with the overall objectives of the organisation on tax risk. Control activities These are the detailed procedures and processes that have been designed and established to manage the tax risks identified in the risk assessment. The design and operation of control activities should ensure that the tax risks are managed in order to achieve the organisation’s tax risk objectives. Information and communication This is the information and communication necessary to ensure the organisation’s objectives in respect of tax risk are documented and communicated to the relevant people. It will include the operating policies and procedures within the organisation that are necessary to ensure all tax risks are identified and quantified and that the controls designed to manage those risks are documented. Monitoring These are the procedures put in place to review the effectiveness of the operating of the internal controls over tax risks, and to enable conclusions on the effectiveness of the controls over taxes to be reached. References http://www.deloitte.com/view/en_CH/ch/industries/financialservices/privatebankingcentreofe xcellence/positivegovernanceintoughtimes/taxriskassessment/index.htm http://www.pwc.com/en_GX/gx/tax-management-strategy/pdf/tax-risk-managementguide.pdf
doc_197430947.docx