Businesses are preparing for a new era of tax risk: EY’s insights
Strategies for Achieving Tax Certainty: Prevention is Better than Cure
In the world of taxes, the age-old adage “prevention is better than cure” holds true. Many tax authorities offer programs that aim to provide taxpayers with higher levels of tax certainty, reducing the risk of audits and disputes. These programs, both pre- and post-filing, can help taxpayers navigate the complex world of taxation with more confidence.
Pre-filing programs, such as securing tax rulings or Advance Pricing Agreements (APAs), are valuable tools for taxpayers looking to avoid disputes. However, a survey found that less than half of respondents currently have a proactive, cooperative compliance strategy in place. This highlights the need for businesses to invest more time in understanding and complying with tax regulations.
Despite best efforts to prevent disputes, tax disagreements can still arise. In such cases, having a well-defined tax documentation strategy is crucial. Many tax and finance executives admit to not maintaining proper documentation files, which can hinder their ability to resolve disputes effectively.
When disputes do occur, dispute resolution programs like the Mutual Agreement Procedure (MAP) can help resolve cross-border double taxation issues. However, many businesses are not fully aware of the benefits of MAP and may not have a defined tax litigation strategy in place.
Looking ahead, with the implementation of initiatives like Pillar Two and public Country-by-Country Reporting (CbCR), achieving higher levels of tax certainty will be essential. By centralizing and streamlining tax controversy processes, businesses can better manage risks and avoid exposures.
In an uncertain world, securing any degree of tax certainty is crucial. By implementing robust tax governance frameworks and leveraging data capabilities, tax functions can contribute more value to their organizations and turn risks into opportunities. Ultimately, taking proactive steps to ensure tax certainty is a smart and strategic move for businesses in today’s complex tax landscape.
This article is general education, not financial, legal or credit-repair advice. We do not promise score increases, removals or approvals. See our Financial Disclaimer.
