For a first impression Internal Audit could raise the following questions: The answers give insight of the existence of the right building blocks of an Indirect Tax Control Framework and give an auditor the possibility to draft his first conclusion on process and risk management around indirect tax.When however the conclusion is that the right building blocks TCF are not present (question are answered negatively), Internal Audit probably could take the role as pro-active advisor with regard to the right set up of internal indirect tax processes.Often these risks can be benchmarked with other multinationals: An example of a normative process re cross-border transactions within the EU: Douane en FIOD nemen bijna 7 miljoen illegale sigaretten in beslag De Douane heeft vrijdag 24 augustus in Maastricht een partij van 6,7 miljoen illegale sigaretten aangetroffen.
Many companies prioritize too low indirect taxation, such as VAT.
In the news we see more focus on tax risks in various areas such as offshore tax planning to reduce effective tax rate, tax evasion and (VAT) fraud.
An recent example is Tim Cook defending Apple tax policy in a Senate hearing where Congressional investigators released findings showing that Apple uses a “highly questionable” tax minimization strategy of impressive complexity.
To perform such a role Internal Audit need to have the following competencies: These are the conditions under which Internal Audit could fulfill a proactive role relating indirect tax risk management.
In practice, the best way to achieve this is often to limit the scope and request the top 3-5 indirect tax risks that exceed the company’s indirect tax appetite.