Recruitment News

Cost of the tax function versus tax liability

London, 16th July 2009

In their recent tax review Ernst and Young explore the question of whether corporates should be looking hard at the cost of the tax function or the tax cost of the business.

Cost of the Tax Function

For a large number of organizations, this year has brought significant headcount reductions within Group functions. However, does it make sense for companies to adopt this strategy within tax? Definitely not - but why is this the case?

EY identify that, in the world’s largest businesses, 50% have less than 25 people in the tax department globally. This is a very small number when we are talking about a corporate tax liability that is approximately one third of profits.
Tax departments traditionally rely on colleagues within the finance function to assist with compliance and tax reporting. With a shrinking finance function it is likely that the tax department will become increasingly stretched.

Reducing the Tax Cost

The tax function can lower the tax cost and thus generate cash by reducing or deferring taxable income and by increasing or accelerating deductions. Anti-avoidance legislation means that all tax planning requires a valid commercial rationale. As a result of the economic conditions, corporates are undergoing restructurings and reorganisations that provide significant opportunities for tax planning. EY also point out that tax authorities around the globe are reforming tax laws in light of the global recession.

Surely all this means that the tax department will be even more stretched in months to come?

The Interim Solution

We are in a position where the tax function is under increasing pressure and yet is often unable to recruit the resource it needs.

Maven Partners believe that we will see an increased demand for experienced tax interim professionals who can come in and add value to the cash tax position of the company.

Rob Stephenson is a Managing Partner at Maven Partners, a specialist tax recruitment business.

robstephenson@mavenpartners.co.uk

+44 (0)20 3178 8847

Back to Recruitment News index