Tax Governance – 2 Words You Will Want to Stay Awake For.

Date Posted:Tue, 11th Jul 2023

On 1 June 2023, the UAE Corporate Tax Law became effective. While these 2 words: tax and governance may not be exciting for most of us, you may want to grab a cup of coffee to understand the importance of this change on your business.

Taxes often seen as an administrative burden, may now present some new risks to your business. Here are some that you might consider:

1. Compliance Risk: Failure to comply with tax laws and regulations can result in penalties, fines, and legal issues. Inaccuracies in tax calculations, insufficient records, or filing tax returns late all present new risks to your organisation.

2. Reputational Risk: Negative publicity from tax-related controversy or unethical tax practices can damage the reputation your organisation has built, eroding customer and stakeholder trust and loyalty.

3. Financial Risk: Underestimating Tax Liabilities can strain an organisation’s financial resources, affecting cash flow, profitability, and overall financial stability.

So now you have recognised tax as a potential risk, how can you manage it?

Tax governance is the framework, processes, and ways of working that you can put in place to manage tax-related risk and compliance effectively. 3 Key aspects include but are not limited to:

1. Compliance & Reporting: Expand your existing Compliance activity to include compliance with tax laws, regulations, and obligations such as recording keeping and timely reporting.

2. Policies & Procedures: Having understood your risk and compliance requirements from a Tax perspective, establish key controls such as Tax Policies & Procedures that outline your organisations approach to tax compliance, risk management, and decision-making.

3. Train your People: Invest in developing tax knowledge and expertise within your organisation, including training employees involved in tax matters, and foster a culture of tax compliance and awareness.

Implementing effective tax governance will contribute to improved financial performance, stakeholder and customer confidence, and long-term sustainability, ensuring you can sleep soundly, not because you are bored of tax and governance but because you have mitigated your tax risks.

Tina Chugani is the Managing Director of Proxis, an IT Solutions Business that provides the leading Governance, Risk & Compliance platform: Risk Cloud from Logicgate.