Day 2: Session 1 Transforming today for the challenges of tomorrow The Westin, Singapore 26 February 2016 Rony Wuytjens - Deloitte 1
APAC Roundtable Transformation why? 2
God grant me the serenity to accept the things I cannot change, the courage to change the things I can and the wisdom to know the difference Ignatius Loyola c 1520 3
Transformation why? External trends are impacting tax As business GLOBALIZES so do tax obligations together with a pressure for centralized global delivery Increased REGULATION makes business more complex but also more transparent... raising risk and enabling mainstream media coverage TECHNOLOGY proliferation fuels expectations for wholesale process change, and becomes a catalyst for reengineering tax TALENT new skills are needed and there is a new environment within which to attract and retain people Transformation of REVENUE AUTHORITIES the way they go about their work New STAKEHOLDERS have emerged and we are confronted by a new era of socially responsible tax 4
Legislative changes 5
The story so far Control powers of tax authorities Disclosure Of Tax Avoidance Schemes Generalised electronic filings Tax in the Boardroom Digital bookkeeping and filing Increased Digital Data requests Transparency: exchange of tax rulings 6
International response OECD s Base Erosion & Profit Shifting study State Aid Tax Rulings Action Plan on Corporate Taxation Unilateral measures 7
What does it mean? More taxes and more reporting in more jurisdictions Modelling the impact: Increased risks or increased ETR or both? How? When? 8
Australia BEPS status Action Status Digital economy Hybrid mismatches CFC Interest Harmful tax practices Treaty abuse PE status Transfer pricing Monitoring CbC master/local file Dispute resolution Multilateral instrument GST on digital products effective from 01 January 2017 New law expected by May 2016 No change: Australia s rules meet OECD best practice Australia has already tightened its thin capitalization rules ATO has already implemented exchange of ruling Adopted in negotiation of new/updated treaties Dealt with in Multinational Anti Abuse Law eff. 01 January 2016 Enhanced guidance to help ATO s administration Government estimate BEPS problem is 4 to 10% of tax revenue Implemented effective January 1, 2016 Committed to binding arbitration Signing expected by end of 2016 9
Pervasive information technology 10
Pervasive information technology Ambient computing The merging of the physical and the virtual world Information rules The API Economy (Application Programming Interface) Amplified intelligence The next generation of knowledge systems 11
Pervasive information technology Cyber and data privacy Managing the acquisition and custody of information Complexity and change Picking a path through the tax technology jungle 12
APAC Roundtable Transformation what and how? 13
"Everything that can be invented has been invented Charles Holland Duell c1899 US Commissioner of Patents Thomas Watson 1943 President of IBM When we set the upper limit of PC-DOS at 640 KB, we thought nobody would ever need that much memory Bill Gates Chairman and CEO of Microsoft 14
Tax transformed the professionalisation of tax Tax Policy Framework KPIs/KRIs Tax Risk Management Culture and ethics Tax Vision, Goals and Strategy Report People and organisation Processes Risks Risk appetite Tax Outputs and Communication Oversight Test Systems Controls Decision making Accountabilities Control standards 15
Tax policy, risk and operations 16
Increasing formalisation of tax policy Groups are increasingly defining their tax policy Accountabilities for taxes getting clearer No 23% Yes, for some areas 29% Yes, for all four areas 47% Source: Deloitte Global Market Research, 2014 17
Answering key questions How is success measured? (KPIs) KPIs/KRIs Tax Policy Framework Tax Risk Management Culture and ethics How are key decisions made? (Decision making) Tax Vision, Goals and Strategy Report People and organisation Processes Risks Risk appetite Tax Outputs and Communication Oversight Test Systems Controls Decision making What governance is there over tax? (Oversight) Accountabilities Control standards Who owns each tax? (Accountability) 18
Identifying, controlling and reporting tax risks Groups generally have processes for identifying, controlling and reporting tax risk More and more third parties have a specific interest in tax risks and how they are managed Source: Deloitte Global Market Research, 2014 Tax Authorities e.g. UK, Australia, Netherlands, Singapore, Japan, Spain International bodies e.g. OECD The press Investors e.g. Local Authority Pension Fund Forum Analysts e.g. Schroders, Citi Indices e.g. Dow Jones Sustainability Index, MSCI World NGOs e.g. Action Aid, Tax Justice Network 19
Developing a risk-based approach How do we report to the stakeholders? (Report) KPIs/KRIs Tax Policy Framework Tax Risk Management Culture and ethics What are our key tax risks? (Risks) Tax Vision, Goals and Strategy Report People and organisation Processes Risks Risk appetite Tax Outputs and Communication Oversight Test Systems Controls Decision making Is Internal Audit testing tax? (Test) Accountabilities Control standards Who are our lines of defence? (Controls) 20
Global tax operating models 21
Increasingly centralised decision-making Global tax operating models: past, present and future Source: Deloitte Global Market Research, 2012 and 2014 22
Pressure for continuous improvement Satisfaction (% happy) with current model by driver and method Source: Deloitte Global Market Research, 2014 23
Evolving the operating model Do we have the right scale, roles, locations? KPIs/KRIs Tax Policy Framework Tax Risk Management Culture and ethics Can we streamline adjacent processes? Tax Vision, Goals and Strategy Report People and organisation Processes Risks Risk appetite Tax Outputs and Communication Oversight Test Systems Controls Decision making What is the right in/out/co-source model? Accountabilities Control standards Can we leverage our Shared Service Centres? 24
Tax technology 25
Technology satisfaction levels Source: Deloitte Global Market Research, 2014 26
Plan, budget, responsibility Source: Deloitte Global Market Research, 2014 27
Tax technology can and cannot be solved with tax technology? WHAT solutions are relevant for tax? do you choose: buy or build your own? 28
Tax technology AIM technology to support both your tax function as well as your organisation as a whole (not the other way around) 29
Why look at your tax technology architecture? Tax technology landscape 30
Conclusion 1. Strategy, Policy, Risk and Operations 2. Compliance Operating models 3. Technology Interconnections change management Communication 31
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