Managing the Speed and Risk of Non-Regulatory Tax Scrutiny

  • November 07, 2014

The regulatory drive for greater tax transparency has been intensifying, but what’s new is the rapidly increasing influence and speed of non-regulatory criticism of corporate tax management decisions and practices. 

Detailed tax information is now immediately available to almost anyone at the click of a mouse or the swipe of a smart phone screen. Those doing all of this clicking and swiping -- non-regulatory groups and individuals – have emerged as influential critics of tax management practices. Just look at how non-regulatory criticism of “tax inversion” practices attracted the attention of U.S. legislators.  

This demonstrates that companies and their tax functions have entered an era of extreme transparency. While there is no going back, there are several useful ways to respond to non-regulatory scrutiny, including the following:

  1. Recognize the Risk: Some forms of non-regulatory scrutiny, regardless of “factual” information, can exert major reputational risks. These impacts can potentially rival the impact of product recalls or regulatory enforcement actions. 
  2. Consider and Collaborate: Tax executives should examine and consider the potential impact of non-regulatory scrutiny when devising their tax planning strategies and practices. Tax executives should also discuss these implications with their senior management colleagues, as well as the board of directors (often the audit committee). These discussions should focus on the tax risk profile the company is willing to take on and could include an optional communications plan to refute claims by non-governmental organizations (NGOs) and the media.
  3. Be Prepared: It pays to have quick and convenient access to tax data and information when countering non-regulatory scrutiny. The most effective way to achieve this access is through data management and business intelligence tools that can collect, consolidate and disseminate an enterprise’s global tax data. 

Preparation is crucial because public interest in companies' tax practices has never been higher.

Non-regulatory scrutiny can strike at any moment, swiftly sparking major reputational risks. How swiftly? A recent Internet search of the term “tax inversion” yielded 3.4 million results in less than a half-second.

Please remember that the Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information.

About this Contributor

Bernadette Pinamont Headshot
Bernadette Pinamont
Vice President, Tax Research

Bernadette Pinamont is Vice President of Tax Research responsible for leading a global team of 85 tax professionals who contribute subject matter and technical expertise to build and maintain content for all products, powering millions of effective tax rate determinations for customers in over 19,000 global jurisdictions.

Prior to joining Vertex, Bernadette was Vice President of Tax for Endo Pharmaceuticals. Bernadette's 30 plus year tax career also includes the corporate tax departments of AstraZeneca, DuPont, Syngenta, Tyco Toys, and, initially, EY. When Bernadette joined Vertex in 2013, she was a thought leader in the Chief Tax Office and engaged both industry and clients on the trends, patterns, and emerging solutions to address the global challenges associated with regulatory compliance and tax technology.

Bernadette regularly speaks at local and industry events about tax and the importance of technology, including the annual International Tax Review’s (ITR) Women in Tax Forum. She leads the Philadelphia Women’s Tax Network and is a graduate of Seton Hall University, from which she earned both a B.S. in Accounting, Summa Cum Laude, and her Juris Doctor. Bernadette is also a licensed attorney and a CPA.

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