The government is preparing measures to combat tax evasion and to achieve greater transparency regarding tax obligations. The business community will also get rid of the negative tax picture.
As the clouds of sanctions against Russia slowly begin to rise, the transparency of the registration of companies, organizations and wealthy individuals is clear when it comes to their tax liabilities. Supervision and enforcement of sanctions were severely hampered by a lack of transparency. The Netherlands is a tax haven where companies that want to avoid tax as much as possible are welcomed with open arms. The Netherlands therefore belongs to the “axis of tax evasion”. In addition to the Netherlands, this axis consists of the United Kingdom, Luxembourg and Switzerland. Together, these four countries account for almost half of all corporate tax evasion worldwide.
Politicians and business now have the will to do something about it. In part under pressure from the European Commission, the Dutch government is preparing measures to combat tax evasion and to achieve greater transparency regarding tax obligations. Politicians want the Netherlands to no longer be internationally known as a tax haven.
And business will also get rid of the negative tax picture. At the initiative of the employers ‘organization VNO-NCW, several large companies have already signed the Tax Governance Code for the employers’ organization. Companies that sign the code do not promise to use detours in tax payments through tax havens. They see tax payment as part of their social responsibility and they classify this under Corporate Social Responsibility (CSR). Based on the Tax Governance Code, companies provide insight into their tax strategy and provide insight into what they pay in tax per. country where they are active.
It is not just for tax morale and corporate social responsibility that more and more companies are striving for more tax transparency. Since the last credit crunch, key internal and external stakeholders in companies have demanded more transparency in the area of their tax liabilities. This includes investors, tax authorities, supervisory bodies, shareholders, internal audit committees and management. They want to know what tax risks there are and what measures have been taken to control these tax measures.
To be ‘in control’, the Tax Control Framework is increasingly becoming part of the Business Control Framework. The tax control framework includes all taxes that apply to the organization, such as corporation tax, payroll tax, turnover tax, import taxes and excise duties, statutory energy tax, gaming tax, environmental taxes, packaging tax, BPM, airline ticket tax, etc. After implementation, the framework is assessed on the basis of its design, existence and operation.
Challenge for controllers
Procedures and ICT environments must be designed in such a way that tax liabilities become visible and clear. For controllers, many companies and organizations still have a major challenge in that area. Frameworks must be developed together with tax specialists and IT specialists. It is obvious that this is done on the basis of the COSO model (because it is an international standard), and that liability can also be made subsequently (Tax Assurance). Tax accountants (such as the Register Tax Accountant; RTA) could support controllers within companies and organizations in setting up tax control frameworks. They are used primarily to address tax issues from an interdisciplinary approach, and they understand the impact on the audit of financial statements, and they recognize its importance to society.
Businesses and organizations that subscribe to the Tax Governance Code want to be transparent about how they handle their tax liabilities. They argue for a different tax morality. And this initiative from VNO-NCW is to be welcomed. Only without a well-functioning tax control framework will it continue to be difficult to actually realize this desired transparency across the board. And for many companies, such a framework is still in its infancy. Directors will therefore have to work to establish such a framework in their own organization, supported by their controllers, who are ultimately responsible for the internal control of financial and tax risks. And the tax auditor (think of the Register Tax Accountant; RTA) can advise and support them in this. It’s time for a change!
Every week, a professional from our cm: news panel looks back at the news. This week: Dr. Arjen Bonestroo MEd is program manager at Markus Verbeek Praehep (MVP) and board member of SRFA.