Openness, not caution, is the best response to increased scrutiny of tax says new KPMG International study.

Increased scrutiny of tax matters by regulators, investors and pressure groups is leading to a “creeping conservatism” in tax policies around the world, according to a new KPMG International report, The Governance of Tax. But boards that are too cautious in their approach to tax can risk losing out to competitors who see good tax management and transparency as a way to generate value.

The report argues that the inclusion of tax management as an important component of corporate governance gives companies an opportunity to gain a competitive advantage by spelling out their tax policies and their attitudes to tax risk clearly and consistently to external stakeholders. It suggests leading organizations in the tax field:

have a clear, defendable position on how tax and tax risk are managed

have a well-documented, board-approved tax strategy

have an enterprise resource planning system able to provide useful tax information

present tax information in a clear, meaningful way to both internal and external stakeholders

seek to influence the tax debate between taxpayers and the tax authorities.

The report is a sequel to KPMG International’s seminal Tax in the Boardroom paper published in 2004. It’s intended to provoke a debate among business people, regulators, academics and commentators on how good tax management can be a source of reputational advantage, and therefore a generator of value.

To read a PDF version of the discussion paper, click on the link below.