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Business: Economic Pressures Place Importance on Tax Relations

 





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Business and tax authorities, both under intense pressure to produce cash at a time of global economic recession, will benefit from adopting the enhanced relationship program launched by the Organisation for Economic Cooperation and Development in Cape Town a year ago, says KPMG Global Head of Tax Loughlin Hickey.

Speaking during a visit to Johannesburg this week, Mr Hickey said that just as companies are under pressure from shareholders and their markets to maintain the flow of cash, so tax authorities will be working hard to meet the revenue needs of their governments in the face of a decline in the tax take.

“It is at times of stress like this that good relationships between tax authorities and corporates will really pay dividends for both sides,” said Mr. Hickey, “and the OECD’s enhanced relationship program offers a practical framework for people wanting to take this path.”

“The South African Revenue Service has taken major steps in this direction with the introduction of relationship managers for larger corporate clients. But I think all will acknowledge that there is still scope for progress in this area. The relationship with the tax authority is an important stakeholder relationship that needs to be proactively managed by business.”

Tosca Dos Santos, Partner at KPMG South Africa’s Tax Management Services group said that this was a major issue for South African companies involved in the rapid expansion into other parts of Africa.

“Relationships between tax authorities and foreign owned companies can often be difficult, and we know that some South African businesses have not found it easy to allay the suspicions of revenue bodies elsewhere in Africa. In these tough times a good relationship is especially valuable, so we are working with many of our clients to help implement the recommendations of the OECD report.”

“We have seen a big push to make tax a boardroom issue, and an increasing number of South African Companies are addressing the issue of their tax strategy in a much more transparent way. It is important that we use this progress to help deal with the tax problems caused by the current pressure on working capital brought about by the global credit crunch” she added.

The enhanced relationship was originally proposed by the OECD in its report on research into the role of tax intermediaries, published in Cape Town in January 2008. It offers taxpayers light touch regulation based on commercial awareness, impartiality, proportionality, openness and responsiveness in exchange for greater transparency and disclosure.

Among the help on offer to companies and authorities wanting to pursue this path is a new document from KPMG International which summarises the results of the study and offers a series of questions aimed at giving tax professionals an opportunity to find a way forward based on a constructive dialogue around the practicalities of the enhanced relationship.

It also introduces a 10 point questionnaire, which is being hosted on KPMG.com, to track progress in developing these relationships around the world. Tax authorities, taxpayers and tax advisers are being encouraged to visit the site and complete the questionnaire to provide a benchmark for future progress.

KPMG’s summary is not a substitute for the original report, but is intended as a way to make it more accessible. Also, by developing a series of issues that the report left open, the summary encourages more people to join the debate, and to seek a way forward that is practical for them in the country and context in which they work.

“The OECD study should be seen as part of a dialogue, with more work from all sides needed to implement the recommendations effectively. “said Mr. Hickey. “Since it was launched, we have observed that there is much goodwill around the concepts, but we now need to take this debate forward. This is the aim of this initiative by KPMG.”


 
 
 
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