Strategy The starting point in managing and controlling a group s tax should be to define its tax strategy. The tax director- with approval from his Board - needs to set out the principal objectives, all of which should tie into the underlying business objectives 65 percent of our respondents had written objectives. The survey did not ask whether these were part of a broader strategy document, or part of individual appraisals, but on the surface the result is encouraging. 86 percent of those with written objectives agreed or strongly agreed that their objectives supported the overall business objectives and were suitably aligned. However, while this suggests that objective setting is becoming more prevalent, a necessary postscript is that there are still 34 percent for whom written objectives remain an unknown luxury. Yes, for some the objectives may be understood from conversations or osmosis, but are these respondents really expected to manage the tax function's performance, and be judged, on such a basis? ca respondents had oos ity of Only a small minority of those responding(14 percent) had obtained the Board's formal approval of Only a small minori ined their objectives(fig 4 the Board's formal approval of their obiectives Figure 4: How tax The objectives are formally agreed by the board 14% departments objectives are set and approved The objectives are approved outside the tax department (e.g. by the CFO) The objectives are approved solely by the tax department% There 10%20%30%40%56% Base: All respondents ( 96) Percentage of respondents A greater number had received approval from outside Tax, often from the CFO, but the overall picture is one where the most senior management has either not signed off on what Tax is trying to do, or believes it to be something which can be delegated. Yet tax can erode a third or more of a companys profitability. Is it likely that such a level of trust would be placed in other areas of the business which have such a potential impact on the bottom line? Because of its specialized nature tax is seldom subject to close oversight by the board of directors. This is causing concern in some quarters. In Australia, the Commissioner of Taxation is writing to the chairmen of publicly listed companies', advising them to take a greater role in the management of tax risk. Source Australian Taxation Office 0 2004 KPMG International. KPMG International is a Swiss cooperative of which all KPMG firms are members. KPMG International provides no services to client Each member firm is a separate and independent legal entity and each describes itself as such. All rights reserved.3 © 2004 KPMG International. KPMG International is a Swiss cooperative of which all KPMG firms are members. KPMG International provides no services to clients. Each member firm is a separate and independent legal entity and each describes itself as such. All rights reserved. Strategy The starting point in managing and controlling a group’s tax should be to define its tax strategy. The tax director – with approval from his Board – needs to set out the principal objectives, all of which should tie into the underlying business objectives. 65 percent of our respondents had written objectives. The survey did not ask whether these were part of a broader strategy document, or part of individual appraisals, but on the surface the result is encouraging. 86 percent of those with written objectives agreed or strongly agreed that their objectives supported the overall business objectives and were suitably aligned. However, while this suggests that objective setting is becoming more prevalent, a necessary postscript is that there are still 34 percent for whom written objectives remain an unknown luxury. Yes, for some the objectives may be understood from conversations or ‘osmosis’, but are these respondents really expected to manage the tax function’s performance, and be judged, on such a basis? Only a small minority of those responding (14 percent) had obtained the Board’s formal approval of their objectives (fig 4). A greater number had received approval from outside Tax, often from the CFO, but the overall picture is one where the most senior management has either not signed off on what Tax is trying to do, or believes it to be something which can be delegated. Yet tax can erode a third or more of a company’s profitability. Is it likely that such a level of trust would be placed in other areas of the business which have such a potential impact on the bottom line? Because of its specialized nature tax is seldom subject to close oversight by the board of directors. This is causing concern in some quarters. In Australia, the Commissioner of Taxation is writing to the chairmen of publicly listed companies1 , advising them to take a greater role in the management of tax risk. Figure 4: How tax departments’ objectives are set and approved Only a small minority of respondents had obtained the Board’s formal approval of their objectives 1 Source: Australian Taxation Office