An unprecedented number of large & high profile businesses were caught out in 2019 for underpaying staff, and we’re not just talking about the hospitality industry.
They faced public backlash and a long period of public relations crisis and have since spent millions on rehabilitating their brands.
Most of these cases had 1 factor in common. They were let down by insufficient systems, controls and external reviews. These corporates did not frivolously devise strategies to rip off their workers, rather, they were let down by a lack of safeguards and specialist support.
Most of these cases had 1 factor in common. They were let down by insufficient systems, controls and external reviews
What’s most concerning is that these large, high profile corporates ranging from supermarkets, hardware stores, banks, airlines, TV broadcasters, retailers – all spend millions each year on Tax Advisory, Consulting and internal/external audits. We investigated and our findings are summarised below:
1. Insufficient Tax Risk Management & Governance
Effective Tax Risk Management is not about creating policies and procedures which are left to gather dust. Its about implementing and continually making adjustments, improvements, testing and ongoing monitoring.
Whilst we cannot comment on the tax risk management of these corporates (as that is not publicly available information) the fact that these issues arose indicates that their tax risk management policies and procedures were insufficient. Tax risk management and governance involves:
- Implementing appropriate controls to review compliance risk;
- Documenting policies, procedures, roles and responsibilities;
- Regular internal/external assurance reviews; and
- Regular staff training to keep up to date with ongoing reforms & developments.
2. The Familiarity wall
Have you ever hit that familiarity wall? Its a concept that explains how your day to day involvement & familiarity with your work interfere’s with your ability to potentially identify issues.
The major issues in most of these cases is that internal reviews were not as effective because the staff performing those reviews we so familiar with their work it caused them to skip steps and fail to identify important cues which could have potentially uncovered the issues.
The familiarity wall also applies to external Tax Advisors who have been involved with their clients for so long that their own external reviews have become less effective. In addition, they tread very lightly when uncovering any new issues in fear of the burning question “why hasnt this been uncovered before”.
Effective Tax Risk Management is not about creating policies and procedures which are left to gather dust
Learning points
One thing is for certain, avoiding the shame file and what follows should be high on the agenda for all businesses. Those that have gone through the trials and tribulations have realised the impact of insufficient tax risk management and governance both in terms of the impact on their brand as well as their balance sheet. If they could turn back time, they would:
- Revisit their Tax Risk Management & Governance procedures
- Obtain annual Tax Compliance assurance reviews (preferably rotating advisors)
Rotating advisors is a key aspect of the above. And yes, we all know that it means you lose some familiarity and that it requires additional time and costs. However, its a small amount to pay if it helps to minimise the threat of self-review and to ensure your compliance is kept squeaky clean.
If you would like more information on how the Specialist Taxes Group can assist your organisation, feel free to contact us on 1300 878 876 or contact@specialisttaxes.com.