Internal auditors can provide boards with help and assurance that the European Union’s new rules on tax reporting have been properly implemented in their enterprises, according to speakers at a recent co-hosted ECIIA event at the European Parliament on the issue.
“As the third line of defence in organisations, and depending on the maturity of the taxes processes, internal audit may provide assurance about tax reporting, or function as an adviser,” Silvio de Girolamo, Chief Audit Executive at Italy’s Autogrill, said at the breakfast meeting, which was organised by the confederation in conjunction with the Federation of Risk Management Associations.
He said internal auditors would be able to coordinate their work with chief risk officers and tax managers to ensure controls around tax reporting were complete and effective. This would also help minimise the duplication of the effort needed to comply with the new provisions.
Jonathan Blackhurst, Head of Risk Management at Capita (UK) told delegates that getting it right would be important because the rules would increase reputational risk. “It will be a challenge to determine whether or not the public will believe that you have paid enough tax or not, as figures can be sensationalised when taken out of context,” he said.
The idea behind so-called country-by-country reporting is to get citizens closer to businesses and to restore trust, Jean-Philippe Rabine, European Commission DG FISMA explained to attendees at the event. The rules are meant to ensure that profits earned in any one country are taxed at the local rate, rather than allowing companies to aggregate their profits across all of the European countries in which they operate and have them taxed in a jurisdiction of their choosing.
MEP Evelyn Regner, Shadow Rapporteur on the directive and MEP Jeppe Kofod also attended the meeting.
The European Commission is proposing a one-year implementation period for all member states and between half a year and one year for businesses. The first Country-by-Country Reporting can be expected by fiscal year 2018.
European Parliament Committee on Legal Affairs recently reported that the rules for country-by-country tax reporting had not been included in the transparency legislation intended for institutional investors and asset managers, but expects the matter to be resolved shortly.
Click here for a summary of the event.
Click here for more on the legislation.