King IV recognises the importance of tax governance
It is becoming increasingly common for shareholders, employees, customers and members of the public to want to know that an entity’s tax affairs are compliant and that they meet a standard which is beyond reproach. As such, boards of companies are having to think harder about how they can discharge their responsibilities to govern their entities’ tax affairs.
- Join us at the upcoming Finance Indaba on 13 and 14 October 2016. Get your free ticket with code SM2016.
It is against this backdrop that the draft King IV report has included Tax Governance as one of its foundational concepts. The report places responsibility on the governing body and audit committee in leading a compliant tax strategy and policy that also aligns itself to corporate citizenship and wider stakeholder relations.
Devon Duffield (pictured), Managing Partner for KPMG's Tax and Legal practice, has welcomed this inclusion in the draft King IV report, but warns that it might not go far enough to fully enable those charged with governance on how to carry out these responsibilities.
"Organisations that want to be able to adopt a position of responsible tax will have to be able to demonstrate to the board not just a strategy and policy around this, but also all the other aspects of control and assurance that a board will need. This includes an organisation's systems, processes, internal controls and the increasing use of data analytics to prove compliance with laws and stakeholder sentiments across multiple jurisdictions."
Duffield added that while some progress in this space has been seen, a formalised and comprehensive approach to how an organisation manages and controls its tax affairs across the globe is required, as is clarity on how the board gains its assurance on these affairs. Only then can boards of companies be comfortable that they are discharging their governance responsibilities around this new, many-faceted challenge, he says.