FINANCE & ECONOMICS

From control to dialogue - tax governance creates a paradigm shift

Closedness and control have been replaced by openness, transparency and dialogue between companies and tax authorities when collaborating on tax reporting. But what new tasks does this entail? Where does it leave the external tax advisor? And what does digitalisation mean for dialogue? A new Master of Tax programme looks at developments in tax governance.

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Karen Boll is an associate professor at CBS and teaches at Master of Tax

Today, we see more often that companies are open and transparent with authorities and that tax authorities reciprocate with increased trust and information in their dialogue with companies. ICAP, enhanced relationship and co-operative compliance programmes are examples of such initiatives. As a result, the dialogue between company and authority changes character and becomes a discussion of, for example, companies' tax risks, risk management and control environments. In Denmark, the dialogue is known as tax governance collaboration.

Associate Professor Karen Boll from CBS calls it a paradigm shift. Both for companies and tax authorities:

‘The collaboration has been going on for over 10 years and means that employees at the Danish Tax Agency are no longer just classic control employees who audit after receiving an account. Today, they must more proactively engage in dialogue with companies and be service-minded,’ she says and continues:

‘It should also save resources for both companies and tax authorities to work together to find out what is relevant to focus on, and for the authorities not to reactively carry out tax inspections, but instead invite dialogue and open discussion, which is also perceived more positively by companies. For companies, it also means that they have to work with other forms of internal audit and control, which the Danish Tax Agency tries to guide them towards.’

The development of tax governance is also linked to international trends, including more focus on co-operation between companies and authorities, CSR and transparency. The tax governance co-operation was introduced as a test in 2012 and is now a permanent offer for large companies that are considered compliant.

‘The majority of large companies in Denmark are tax compliant. That is, they comply with the rules. They can also make mistakes, but they are fundamentally co-operative and can therefore receive an invitation to become part of tax governance,’ says Karen Boll.

Being tax compliant is defined, among other things, by companies filing taxes on time, publishing tax information and having a history of compliance. Then, of course, there is also a group of risk companies. Here, we take a hard line with control. This is resource-intensive for the authorities, but it's a fundamentally sensible way of utilising resources, as the heavy control and audit work is then directed at the large companies that do not follow the rules,’ explains Karen Boll.

Your benefits from the course

Watch Karen Boll talk about the 3 main learnings and perspectives you will get from our new Tax Governance course. The video is in Danish 🇩🇰.

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Development requires new working methods and roles

There are new working methods associated with the development of tax governance cooperation, and this is exactly what Karen Boll will be teaching in the new Tax Governance course on the Master of Tax (this programme is taught in Danish 🇩🇰).

‘Even though tax governance cooperation is based on dialogue, there is still control. It is just internal controls that the tax authority sets up in collaboration with the company, so-called tax control frameworks, and then it is the company that performs the control. The course looks at how to work with this part of the extended co-operation. We look at specific tools to make the dialogue work, and the course also relates to international requirements for new reporting standards,’ she says.

The course gives participants the opportunity to discuss opportunities and issues from different perspectives. The target group includes tax managers and employees in corporate tax departments, external tax advisors and employees at the Danish Tax Agency.

‘These are also the target groups that are involved in the tax governance collaboration, so it makes perfect sense that they meet to learn more about their own roles and look at the dialogue from other perspectives,’ says Karen Boll.

Dialogue is prevalent, but she still describes parts of the collaboration as ‘a game’:

‘It is a game between ‘transparency’ and ‘certainty’. For example, how big do the risks have to be for a company to bring it to the attention of the Tax Agency? And it is not always the case that the company has the same assessment as the authority.’

The Tax Agency gives an indication of how they view the issues raised in the dialogue, but it is not the final decision. So companies sometimes have to be patient here too.

For the advisor from a consultancy or audit firm, the development means a potential new role.

‘Some would say that they are being pushed out a bit because the dialogue is between the authority and the company. That is one way of looking at it. Another way is to look at who should be advising on internal controls: that is the consultants. And if a company needs to assess what to bring to the table at the Tax Agency, there will typically have been a dialogue with the advisor beforehand about exactly that. The advisor may not always be at the table with the authority, but something happens before and between the meetings that the advisor is often involved in,’ explains Karen Boll.

‘It is a game between ‘transparency’ and ‘certainty’. For example, how big do the risks have to be for a company to bring it to the attention of the Tax Agency? And it is not always the case that the company has the same assessment as the authority.’

Karen Boll

Digitalisation can shake up the dialogue

Although tax governance co-operation has been going on for over 10 years in more than 30 countries, inspired by the OECD, there are still unresolved issues. And new ones are emerging. The new Master of Tax programme is therefore also helping to identify these issues and discuss possible solutions.

Karen Boll explains that for large companies in particular, a somewhat ambivalent relationship with the authorities can arise. She explains it this way:

‘Tax governance covers all tax issues. A company can comply with the rules in many areas and enter into a good dialogue with the authorities. And then there may be a case in a single area, for example in transfer pricing, where a dispute may be ongoing, while the company and the authorities must maintain an open dialogue about the general picture. A group may also operate in many countries where the relationship with the authorities may not be equally good across borders, which can affect the entire tax governance co-operation.

And the possible digitalisation of the collaboration can create new issues.

‘Some countries like Australia and Singapore exchange tax information digitally. Technological solutions for reporting tax matters can therefore change the dialogue. Does this mean that the dialogue will become more or less relevant? We don't know, but we need to monitor and prepare for it,’ emphasises Karen Boll.

The Tax Governance course gives you practical tools to strengthen the dialogue between government and business. You will also be introduced to research literature that critically examines the extent of tax governance cooperation in more than 30 countries - so you can learn from other countries' work in this area.

You will meet these speakers and lecturers, among others:

Christer T. Bell, Head of Tax, LEGO Group
Søren Dalby Madsen, Partner and CEO, KPMG Acor Tax
Mia S. Laursen, Director, LEGO Group
Lars Andersen, Head of Office, Danish Tax Agency
Niels Holger Engberg, Chief Advisor, Danish Tax Agency
Nynne-Maria Holst, Tax Manager, KPMG Acor Tax
Karen Boll, Associate Professor at CBS specialising in tax governance

Read about the course

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From control to dialogue - tax governance creates a paradigm shift

Your benefits from the course

‘It is a game between ‘transparency’ and ‘certainty’. For example, how big do the risks have to be for a company to bring it to the attention of the Tax Agency? And it is not always the case that the company has the same assessment as the authority.’

Strengthen both your practical and analytical approach to tax governance

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