The increasing significance of measuring and managing tax risk in any taxpaying corporation is underpinned by the introduction of SOX 404 (and now FIN 48, details are annexed to this document as annexure 1) in the USA. Both these developments emphasize the importance of transparent corporate governance. These developments are also being followed by changes taking place to IFRS world-wide.

Many material discrepancies in corporations relate specifically to Tax Risk Management problems. Independent surveys conducted on SOX 404 have shown that on average 30% of the material discrepancy filings to the SEC are tax problems.

Tax risk is one of the risk areas within a corporation that is difficult to quantify and manage unless a significant Tax Risk Management process has been effected in that organization. Many of the tax risks have nothing to do with the current financial year and in many instances relate to prior financial periods which may go back many years. What is more is that research has shown that the tax risks exposed do not just reside in the area of tax compliance but emanate from the areas of financial accounting, transactions and the operations of the corporation.

The expertise offered by TRM Services is in the area of putting into place an effective process to expose, measure and manage the tax risk in any corporation in any jurisdiction worldwide. The Tax Risk Management process also relies on the input of key tax technical advisors in each of those jurisdictions to assist in making an effective determination as to the extent of the tax risk issue. Once that has been determined the most appropriate advice and recommendations can be made to senior management in the corporation as to the practical way forward to manage and resolve the tax risk.

The balance of this document sets out the theoretical framework within which such a Tax Risk Management process will be implemented. Apart from executing many Tax Risk Management processes for a variety of multi-national corporations, TRM Services has also been involved in the development of Tax Risk Management from an academic point of view, in determining the driving principles, and in this regard have compiled an extensive guideline which can be followed in detail by any person introduced to the Tax Risk Management process so that they can understand what that process is, what it purports to achieve and the precise steps that need to be taken. It is this process that TRM Service assists in implementing...