[PPT] - Gestion des risques 1 Luc Van Bael Div. Gestion des Risques PowerPoint Presentation

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Colruyt Group Gestion des risques

Luc Van Bael

Div. Gestion des Risques

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Contenu de la présentation

1. Contexte 2. Concepts 3. Méthodologie 4. Processus 5. Vue d’ensemble

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Méthodologie : identification des risques

Risques stratégiques
Ex: positionnement sur le marché, concurrence, structure
rganisationnelle
Risques opérationnels
Ex: IT, RH, transport et logistique
Risques financiers
Ex: problèmes de liquidité, comptabilité
Risques juridiques
Ex: réglementation environnementale, contracts, licences
Risques de force majeure
Ex: catastrophes naturelles, black-outs
> Ensuite, fractionnement en 100 catégories de risque

(univers de risque)

Types de risques

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Méthodologie : identification des risques

A1. Gestion
1.1 Prestations des comités de direction
1.2 "Tone at the top": consistance entre

mots et actions

1.3 Environnement de contrôle
1.4 Responsabilité sociale2
A2. Planning & allocation de

ressources

2.1 structure organisationnelle
2.2 Relations des tiers
2.3 Planning stratégique
2.4 Budget et prévisions
2.5 Liens de collaboration (Joint-ventures,

alliances et partenariat)

2.6 Contrats d’outsourcing
2.7 Special Purpose Entities (SPE's)
2.8 Rendre les technologies disponibles
2.9 Tax planning
A3. Initiatives importantes
3.1 Vision et direction
3.2 Planning et exécution
3.3 Mesurer et monitoring
3.4 Implémentation van technologie
3.5 Business acceptance3
A4. M&A et séparation
4.1 Aptitude de l’opportunité
4.2 Valorisation et fixation des prix
4.3 Due diligence
4.4 Planning, exécution et intégration
A5. Dynamique de marché
5.1 Compétition
5.2 Facteurs macro-économique
5.3 Tendances socioculturelles
5.4 Evolution politique
5.5 Nouveaux marchés et produits
5.6 Croissance rapide
A6. Communication et relations

investisseurs

6.1 Relations avec les media
6.2 communication de crise
6.3 Communication interne
B1. Vente et Marketing
1.1 Marketing
1.2 Publicité
1.3 Branding et érosion de marque
1.4 R&D
1.5 Fixation des prix et promotions
1.6 Vente (magasins)
1.7 Merchandising
1.8 Assistance aux et gestion des clients
B2. Achats, stock et production
2.1 Planning et prévisions
2.2 Achat
2.3 Stock
2.4 Marques propres et propre production
2.5 Distribution et gestion de l’entrepôt
2.6 Transport en logistique
2.7 Dépréciation et démodage de stock
2.8 Impôts indirects
2.9 Transfer des coûts
B3. Ressources Humaines
3.1 Culture organisationnelle
3.2 Travail magasins / entrepots
3.3 Recrutement et rétention
3.4 Développement et prestations
3.5 Planning de succession
3.6 Compensation & avantages
3.7 Relations syndicales
B4. TI
4.1 Stratégie TI
4.2 Gestion TI
4.3 Sécurité accès TI
4.4 Disponibilité / continuité TI
4.5 Dépenses TI
4.6 Intégrité TI
4.7 Infrastructure TI
4.8 Support à la price de décisions (DSS)3
B5. Immobilisations corporelles
5.1 Immobilier
5.2 Propriété, installations et matériaux
B6. Vols
6.1 vols par tiers
6.2 vols par employées
C1. Marché
1.1 Taux d’intérêt
1.2 Devises étrangères
1.3 Matières premières
1.4 Produits financiers dérivés (options,

futures, swaps)

C2. Liquidité et crédit
2.1 Gestion des liquidités
2.2 Vitesse de rotation des stocks
2.3 Funding
2.4 Hedging
2.5 Crédits et encaissement
2.6 Assurance de crédits
C3. Comptabilité et reporting
3.1 Comptabilité, reporting et publication
3.2 Contrôle interne, Sox 404/302 (ou

similaire)4

3.3 Integrité des chiffres rapportés
C4. Structure du capital, structure des

coûts

4.1 Dettes
4.2 Capitaux propres
4.3 Fonds de pension
4.4 Options
4.5 Structure des coûts
D1. Force majeure
1.1 catastrophe naturelle (incl. incendie)
1.2 Terreur et actions malveillantes
1.3 Black-outs, interruptions (de courant)
E1. Code de conduit
1.1 Ethique de l’entrepris
1.2 Fraude
E2. Légale
2.1 Contrats
2.2 Responsabilité légale (liability)
2.3 Intellectual Property (IP)
2.4 Relations internationales
E3. Réglementation
3.1 Commerce
3.2 Douane
3.3 Sociale
3.4 Fonds (securities)
3.5 Environnement
3.6 Protection de données privées
3.7 Qualité et sécurité des produits
3.8 Santé et sécurité
3.9 Pratiques concurrentielle / anti-trust
3.10 Tax compliance
3.11 Vente et marketing
3.12 Allocation de coûts
C. Risques financiers
E. Risques juridiques
D. Force majeure

. Juridische

1. Corporate Control Environment 2. Corporate Social Responsibility (CSR): responsabilités des lois, standards éthiques, nomes internationales 3. Vérification indépendente sur la qualité des services informatiques (ou autres) externalisé 4. Decision Support Systems: moyens qui supportent la prise de décision 5. Réglementation concernant le contrôle interne

Univers des risques

A. Risques stratégiques
B. Risques opérationnels

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Cash Management

The Honeywell Approach Risk Management Seminar, IAB-IEC Séverine Le Blévennec

November 2013

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Overview

Company Profile
Treasury Organization
Liquidity Strategy
100% Cash Visibility
Selecting Banking Partners
Rationalizing Bank Accounts
Concentrating Cash
Investing
Central Role of the TMS

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Company Profile

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Honeywell

Aerospace Automation and Control Solutions

$37.7B

in sales (2012)

54%

sales outside U.S.

Performance Materials and Technologies Transportation Systems

1,300 sites, 70 countries
132,000 employees
Morristown, NJ

headquarters

Fortune 100

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Great Positions in Good Industries

Safety & Security, Energy Efficiency, Clean Energy Generation, Globalization and Customer Productivity Chemicals, Specialty Materials & Fertilizers Safety & Security Aviation & Defense Automotive & Transportation Buildings, Construction & Maintenance Consumer & Home Efficiency, Energy & Utilities Fire Protection & First Responder Healthcare & Medical Industrial Process Control Manufacturing Natural Gas, Refining, Petrochemicals & Biofuels Scanning & Mobile Productivity

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Our Performance

2009 2012 2014* $30.0 $37.7 $41.0-45.0

Sales

2009 2012 2014* 13.3% 15.6% 16.0-18.0%

Segment Margin Rate

One Year (2012) 20% 16%

Total Shareholder Return

Honeywell vs. S&P 500

Through Dec. 31, 2012; *target

Ten Year 240% 99%

$ billions

Honeywell is delivering on its Five-Year Plan and

utperforming industrial peers

in a slow-growth global economy.

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Treasury Organization

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Honeywell Treasury Organization

Regionalized Presence

Regionalized Presence in:

Belgium (In-House Bank)
United Kingdom
Germany
France
Singapore
Shangai
Morristown

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Honeywell EMEA Treasury Landscape

Algeria Egypt Libya Nigeria Angola South Africa Equatorial Guinea Morocco Tunisia

MIDDLE EAST AFRICA

Oman UAE Saudi Arabia Qatar Kuwait Iraq

Complexity & Diversity of EMEA Operations

Cyprus

In-House Bank (Belgium)

Austria Denmark Finland Germany SZ Poland Ukraine Lux France Italy

NL

Norway Spain Sweden Bulgaria Czech Hungary Greece Kazakhstan Romania Russia Serbia Slovakia Turkey UK Ireland Lux Croatia Portugal

EUROPE

46 Countries 337 Subsidiaries 898 Bank Accounts USD 1.8 Bln Cash

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GBC

Friedhelm BRUNAHLGE Regional Treasury Manager +49 69 806 4812

GBC

Ciar TIMONUK Sr Regional Treasury Manager +44 1 344 656242

GBC

Patrice COUTANCEAUFR Sr Regional Treasury Manager +33 1 55 46 21 41

Séverine LE BLEVENNECBE

Director EMEA Treasury +32 2 728 21 71

EMEA Team

Marie-Astrid DUBOISBE

Assistant Treasurer EMEA & APAC +32 2 728 23 98

GBC

In-House Bank Management Cash Investment Strategy MMF Relationship Mgmt Bank Relationship Mgmt Debt Mgmt Tax Partnership and Projects Treasury Systems Strategy Regulatory Compliance Treasury Controls & Sox M&A Due Diligence & Financing Learning Country Coverage

GBC

In-house Bank Daily Operations

I/C Loans Investments Hedging Liaison with Accounting

Francois COUNEBE Senior Treasury Analyst +32 2 728 24 39

Tax Related Analysis & Reports EMEA Mgmt Reportng Back-up In-House Bank Operations

Country Coverage

Cash Mgmt Strategy Investment Supervision Bank Guarantees Intercompany Lending M&A Due Diligence, Integration & Financing Tax Restructuring Execution

Mamadou KABABE Senior Treasury Analyst +32 2 728 22 76

GBC In-House Bank Back-Office Executive Support

Fatima CHAKIRBE Treasury Analyst +32 2 728 20 72

GBC

SEPA Best Practices Country Coverage

Cash Mgmt Strategy Investment Supervision Bank Guarantees Intercompany Lending M&A Due Diligence, Integration & Financing Tax Restructuring Execution Netting GBC

Nicolas GAILLARDFR Manager Treasury Projects +33 1 55 46 21 31 UK Daily Operations

Cash Pool Mgmt Investments E-banking I/C loans Bank Guarantees

Germany

Bank Guarantee Mgmt E-banking admin GBC

Kerstin WEINHARTGE Treasury Analyst +49 69 8064 358 Country Coverage

Cash Mgmt Strategy Investment Supervision Bank Guarantees Intercompany Lending M&A Due Diligence, Integration & Financing Tax Restructuring Execution Netting

Country Coverage

Cash Mgmt Strategy Investment Supervision Bank Guarantees Intercompany Lending M&A Due Diligence, Integration & Financing Tax Restructuring Execution Netting

Country Coverage

Cash Mgmt Strategy Investment Supervision Bank Guarantees Intercompany Lending M&A Due Diligence, Integration & Financing Tax Restructuring Execution Netting

Mhari MCGLINCHEYUK Senior Treasury Analyst +44 1 344 656 285

GBT Staff Location: BE – Belgium; UK – United Kingdom; GE – Germany; FR – France SG - Singapore GBC: Greenbelt Certified GBT: Greenbelt Trained Treasury Brussels Office Contact Details Hermes Plaza Hermeslaan 1H 1831 Diegem Belgium Fax +32 2 728 27 14 Email: Treasury.Hesa@honeywell.com

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International Treasury Strategic Themes

Credo: Stay on Strategy

Simplify Globalize Standardize Automate

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Liquidity Strategy

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Global Investment

Policy

Investment Type Credit Metrics Tenor Concentrations

Metrics Focus on

Policy Compliance Percent Invested Return by Country Eliminating Negative Carry

Sources of Liquidity

Operating Cash Flows Existing Cash Global CP Markets Backstopped by Committed Bank Facilities

Liquidity Monitored

Regionally and by Country

Active Management
f Aggregated

Counterparty Exposure

Managing Global Liquidity

Process & Systems

Focus

Source of Cash Inflow Amount / Location of Cash Percent Invested / Yields Economic Deployability

One Key Partner

Bank Per Country

Daily Visibility
1 Treasury database

Cash Investment Liquidity

Maximize Cash Deployment, Returns & Liquidity

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100% Cash Visibility

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Daily reporting of all bank accounts balances

Leveraging Technology to Automate Reporting

Automated daily bank balance and transaction reporting from 2,236 global bank accounts in a single database

Quantum

AMERICAS 635 Bank Accounts EMEA 898 Bank Accounts APAC 703 Bank Accounts

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Selecting Banking Partners

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Cash Management - Strategy Overview

Maximize Cash Deployability, Returns & Liquidity

1 Bank by Country
Preference to Credit Providers
Thorough RFP Process

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Honeywell Banking Partner Selection

Strike The Right Balance

Reward credit providers
Best in-country bank
Counterparty risk
Legacy from acquisitions
Local legal requirements
Leverage
Interface to ERP
1 e-banking system
Immediate cash visibility

One Bank Strategy Multiple Banks Strategy

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Rationalizing Bank Accounts

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Cash Management - Strategy Overview

Maximize Cash Deployability, Returns & Liquidity

1 Bank by Country
Preference to Credit Providers
Thorough RFP Process
Elimination of Obsolete Accounts
100% Daily Visibility
Acquisitions Integration

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EMEA Bank Account Rationalization

Estimated Of A Recurring USD 943,000 Of Bank Fee Savings Thanks To The Elimination Of Redundant Bank Accounts!

Honeywell Group Total of 1778 Pro format Bank Accounts Total of 467 Legal Entities Pro format

102 11 22 18 21 7 2 3 6 10 8 9 49 4 4 14 2 3 172

943 Total of Eliminated Bank Accounts 898Total of Current Bank Accounts 382 Bank Accounts linked to a Cash Pool 852 198 43 37 79 77 48 21 10 8 22 15 71 213 21 11 43 4 5 48 15

102 11 22 18 21 7 2 3 6 10 8 9 49 4 4 14 2 3 172

Honeywell Group Total of 1841 Pro format Bank Accounts Total of 489 Legal Entities Pro format

16 6

898 943 Current # of bank accounts Total of eliminated bank accounts

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Concentrating Cash

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Cash Management – Strategy Overview

Maximize Cash Deployability, Returns & Liquidity

In-country pooling
Cross-border pooling
Inter-company loans (in-house

bank)

1 Bank by Country
Preference to Credit Providers
Thorough RFP Process
Elimination of Obsolete Accounts
100% Daily Visibility
Acquisitions Integration

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What is a Cash Pool?

For subsidiaries of a group, the cash

can be optimized by pooling all the bank accounts in such a way that the cash rich entities would lend automatically to the cash poor entities and the excess would be invested

A cash pool is a structure involving a

number of separate bank accounts, held at the same bank by different legal entities, whose balances have been consolidated for the purposes of

ptimizing interest paid or received and

improving liquidity management

It creates an overview of the cash

availability

It is a way to centralize cash for

redeployment

On a stand-alone basis, each entity

would deal independently with a bank: the cash rich entity would invest by its

wn and the cash poor entity would

borrow via an overdraft facility or a bank loan

Subsidiaries within a group may have

excess cash and others may have funding needs

Automatic Management of the Working Subsidiaries Capital Needs

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EMEA Cash Concentration Process (I)

276 out of 337 (82%) of EMEA Active Legal Entities are Connected to a CP 20 In-Country Cash Pools & 2 Cross-border Cash Pools

Non-EUR

Sweden Hungary UK The Netherlands Norway Denmark Czech

EUR

France Spain Germany Italy Portugal Finland Belgium Austria

Automatically or semi-automatically sent to HESA via the EUR cross-border cash pool Minimizes the number of I/C loans with HESA

7 ZBA Notional Asia USD CP

5 48 4 41 4 3 16 40 11 22 57 4 3 7 7 35 9 5

BRU USD CP

# of Cash Pool

Ireland

3

Romania Slovakia

4

# of Cash Pool

11 # of Cash Pool 1

# of Cash Pools

1

# of Cash Pool

# of Legal Entities Pooled Situation as of October 2013 Sent via loan to HESA Directly with HESA

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(Semi) automatic process Automatic process Brussels Treasury manual process for I/C & FX Hedging I/C handled by UK Treasury, FX handled by MTO Treasury I/C & FX handled by APAC & MTO Treasury I/C & FX handled by MTO Treasury Legal Entities # of Legal Entities in direct contact with HESA

A

HESA Inter Company Loans and Hedging

EMEA Cash Concentration Process (II)

The In-House Bank in direct relation with 143 LE

UK Asia

Belgium

In-House Bank

B A UK CP Header C C A B A B C A B C

Rest of EMEA

23 Non- EUR CP Headers EUR CP Headers 57 5 5 Asia USD CP 35 EUR CP 36 BRU USD CP 7 A C B

& Americas

6 25 A B C A B C

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Investing

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Cash Management: Strategy Overview

Maximize Cash Deployability, Returns & Liquidity

Time deposits
Liquidity funds
Corporate CPs
High-yield current accounts
Use of on-line trading platforms
In-country pooling
Cross-border pooling
Inter-company loans (in-house

bank)

1 Bank by Country
Preference to Credit Providers
Thorough RFP Process
Elimination of Obsolete Accounts
100% Daily Visibility
Acquisitions Integration

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EMEA Investment Strategy

Objectives
Capital preservation: absolute priority
Deployability: for acquisitions, tax projects, Americas funding
Maximisation of investment return: performance is measured against

country benchmark on a monthly basis

Global Investment Policies – last adapted in Jan 2009
Investment Type
Credit Metrics
Tenor
Concentrations
In practice
Diversification: between low risk instruments and between

counterparties

Competitive Bidding: through electronic trading platforms
Sarbanes Oxley compliance

Capital Preservation as Number One Priority

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EMEA Investment Strategy - Continued

Instruments in EMEA
Treasury Centers (In-house bank and UK):

 Bank deposits  Money market funds  Corporate CP

Trapped Cash and required minimum local working capital:

 Automatic local deposits  High yielding current accounts: systematically negotiated with each EMEA

bank unless not available on the market

Fully reported into Treasury Management System (TMS)
Either via interface
Or via manual input
Allows bank account reconciliation in TMS

Leverage Technology and Maintain Strong Controls

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Central Role of the TMS

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Quantum as the Central STP and STR Tool

 MMF  TD Deals

Manua Inputs

 I/C Loans  Debt Mgmt

FX Hedging Transactions

SAP

 Bank Account Reconciliation  Cash Pooling Management

Quantum

 G/L

Manual Inputs

TD Deals MMF Deals Capitalisations & Accruals of MMF MT940 (SWIFTNET) Payments

All Banks Globally

FX Transactions MT940 (SWIFTNEt) MT940 (FIDES)

 DB-Di Settlements  C/P Exposure  Entity Cash Position  Tax Reports

Leveraging Technology to Support Human Touch

I/C Loans Central Data Repository Reporting

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Cash Management

The Honeywell Approach Risk Management Seminar, IAB-IEC Séverine Le Blévennec

November 2013

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Tax risk management

IAB – IEC J.-L. Van de Perre 7 November 2013

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Tax risk management

KEY MESSAGES:

More complex business and tax environment
Global and strategic approach to manage tax risk
Good tax risk management leads to better company

performance and value creation

limit tax disputes and unexpected

assessments

achieve greater certainty and flexibility
reduce tax provision and compliance costs
minimize threat of reputational risk
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1. Tax administrations become more agressive and

focused

2. High pace of legislative changes
3. Growing disclosure and transparency

requirements

4. Business changes and expansion in new markets
5. Tax activism

Key drivers in the area of tax risks:

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1. Tax administrations become more

agressive and focused

Rapid increase of tax audits and disputes
Application of high penalties – fraude presumption
Share of data information accelerates (updated

treaties OECD)

Tax authorities develop technology databases
International structures and transfer pricing leading

focus

Indirect taxes viewed as a key risk in the future
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2. High pace of tax legislative changes
Acceleration of legislative changes
New laws more complex and international
EU & OECD issue also tax regulations (CCCTB, tax

losses, transfer prices, hybrids, base erosion ...)

Not only emerging markets are the source of

increased uncertainty

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3. Growing disclosure and transparency

requirements

The SOX legislation has been the main trigger
f increased disclosure and transparency

requirements

More and more countries require to report

uncertain tax positions (Australia, US)

The gathering of documentation in the transfer

pricing area is now implemented in most of the countries

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4. Business changes and expansion in

new markets

Business expansion and M&A creates tax risks and

uncertainty

Developing activities in emerging markets is a

major source of tax risks

Internal restructuring generates new tax risks

(business centralization, shared service centers,

utsourcing,...)
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5. Tax activism
Enhanced interest of stakeholders in corporate tax

affairs

Politicians, activists and news media especially

have increased their focus on corporate tax affairs

Tiny line between tax planning and tax fraud –

concept of fair share of taxes

Negative tax reputation may have an impact on

company business and on the relationship with tax authorities

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How to manage tax risks

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Develop corporate governance and manage tax

resources

Establish reporting and disclosure process with

appropriate technology

Install an effective relationship with tax authorities
Tax planning and critical tax pitfalls
Relationship with stakeholders

Global and strategic approach

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1. Corporate governance and

manage tax resources

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Tax corporate governance

Since the financial crisis, leading companies have put

in place communication tools between tax professionals, the board and the audit committee.

Board and audit committees receive regular reports

regarding tax implications of business decisions, processes and tax policies within the company, legislative changes, tax authorities focus and the impact of tax planning on reputation of the company.

The tax function actively receives strategic direction

(two-way communication) regarding risk management and risk tolerance.

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Tax function vision

It is critical to articulate a tax function vision, mission and strategy aligned with the company business and values.

Qualitative goals = contribution of the tax function to

the business

Continuity of operations
Transparency
Report and inform stakeholders timely
Good corporate citizenship (“paying fair share of

taxes”)

Quantitative goals = value added of the tax function in

the company

Tax planning and generation of tax savings
Avoidance of tax assessment and penalties
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Managing your Tax resources

1. Overall tax department organization

Vision & Corporate governance Set-up of responsibilities Balance between internal & external expertise

2. People Management – tax resources

People profile Compensation and succession planning

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2. Process of tax reporting,

disclosure and control

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Tax Reporting and disclosure

Since Sarbanes Oxley US legislation was enacted in 2002, tax reporting and disclosure standards have significantly increased. It resulted in enhanced tax control processes and the implementation of strict control procedures. For tax professionals, it is essential to have visibility on the company tax reporting and cash flow and ensure tax control processes are in place on a local and global basis. The appropriate technology should allow the tax professional to manage tax data efficiently.

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Tax control policy and guidelines

Global tax control policy should cover minimum internal

control standards in critical tax areas

Tax reporting & compliance
Documentation and retention policies
Transfer pricing
Tax planning
Tax audits
Legislative changes
Technology
Tax policies/ guidelines to be part of company required

policies – Global approach

Targets for the Finance team
Excellence program
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Tax reporting and technology

The creation of standardized finance and tax

processes can offer significant opportunity to create an efficient tax global compliance and reporting process (GCR)

Tax teams to be involved in ERP projects, review

data input quality and links with the tax reporting

More and more companies review standardized and

global tax reporting managed through Shared Service Centers or external providers

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3. Methods of collaboration

with tax authorities

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As part of an effective management of tax risks, a good relationship with the tax authorities is critical.While companies look more and more for tax security and stability, tax authorities have less appetite for tax litigation and are looking to interact more efficiently with tax payers. If tax issues can be solved before reaching controversy it avoids costs and time. The method of collaboration can have different forms :

Tax ruling procedures – example of Benelux ruling process
Advance pricing agreements
Real-time tax audit arrangements (NL,US,Canada,UK)
Post filing resolutions

Methods of collaboration with tax authorities

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A. Benelux tax ruling procedure
Provides legal security on envisaged transactions

and restructuring

Competent and dilligent staff
Importance of pre-filing procedure
Theory of abuse of law enhances importance of

ruling procedure

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B. Advance pricing agreements
Can be bilateral or multilateral
Complex and time-consuming procedure
Provides legal security on significant and

complicated pricing agreements

Alternative could be unilateral pricing agreement
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C. Real-time tax audit arrangements
In certain countries like NL, US and Canada, the tax

authorities have adopted optional real-time tax audit arrangements covering the entire tax return process

These arrangements require transparency and

cooperation from the tax payer. In return for full disclosure, tax authorities endeavour to provide timely advice on significant practices and audit the tax return

n a current basis
Alongside certainty and timeliness, the arrangement

can provide tangible results, such as a reduction in the size of the tax provision

Importance of good internal tax control environment

process

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D. Post filing resolutions
After the tax return is filed and in case tax disputes

arise during the examination process, tax payers can enter into a constructive dialogue with the tax authorities in an attempt to reach resolution before starting the legal process

The post filing resolution can take different forms

such as administrative appeals, arbitration, mediation,...

The expansion of post filing resolution mechanisms is

significant the last years (US, Canada, NL, UK)

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4. Tax planning and critical

tax issues

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The tax planning decision process is one of the

most delicate.

It should take into account many parameters and

be aligned with the risk profile and tolerance of the company.

The decision web can be a useful tool to take the

best decision in alignment with the CFO, company board and audit committee.

Further tax planning wrongly executed or providing

no or an insufficient exit scenario can have significant financial consequences.

Tax Planning

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Decision Web - Tax Risk Tolerance

Size
Change of law

risk

Reputation

risk

Disclosure

requirements

Aggressiveness
Ability to

implement/execute/ maintain

Strength of opinion
Commercial

benefit / size

8
6
4
2
10
Policy
Transaction

Source : E&Y

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Tax planning and critical tax issues and risks

In the course of the business, there are critical tax issues or risks which are recurrently encountered, so-called tax pitfalls.

Permanent establishment
Economic substance
Transfer pricing
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Permanent establishment

A permanent establishment (“PE”) abroad normally means a right to taxation of the state in which the PE is based. The risks exist that double taxation may apply including interests and penalties. In the recent past, countries have been aggressive in taxing business presence.

China: project-related services
Italy: Philip Morris case
Russia: payment of consulting/ technical fees
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Economic substance

Proper economic substance in corporate structures is

key to sustain tax reductions and beneficial ownership

f income flows
The need for funds is driving tax authorities in every

country to challenge tax structures

Substance fragilities are being the support to the tax

authorities in several cases. France and Germany as an example require active management of the participations by holding companies

Alignment of tax and business strategy is the optimal

solution to comply with most of the countries internal legislation

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SLIDE 68

Transfer pricing

In a context of greater scrutiny and enforcement, companies should take steps to reduce the transfer pricing risk of controversy

Address issues on a global basis
Comply closely with the rules
Keep contemporaneous documentation
Look for support of economist analysts and industry
groups. Hire internal specialists.
Resolve issues up front (advance pricing agreement,

arbitration, mediation)

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SLIDE 69

5. Relationship with

stakeholders

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SLIDE 70

Relationship with stakeholders

Politicians, activist groups and news media

especially have stepped up their criticism alledging that companies are avoiding tax bills inappropriately or failing to pay their “fair share”

While these claims may rely on incomplete

information and arrive at misleading conclusions, the damage done can be significant

The consequences could range from erosion of the

company reputation and brand to expulsion from markets in extreme cases

Companies should provide appropriate response

through corporate social responsibility channel

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SLIDE 71

Relationship with stakeholders

As a response to tax activism, companies should

choose to answer directly the criticism voiced.The responses should be accurate and posted throught the right channels. Interaction with public affairs department

Proactive action is very helpful to address criticism –

Global citizenship report – Fair share of taxes – Economic contribution of the company to the country

While there is no tangible result yet that negative tax

publicity can have an impact on the demand for a company product, the resulting reputational effect on those companies can only be negative

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SLIDE 72

Relationship with Stakeholders

With so much focus on the tax paid by

companies,tax authorities and governments may be more rigid in new tax legislation and tax

disputes. In this respect, an open relationship

with government and tax authorities is the best way to handle this.

In any case, companies need to be prepared for
criticism. As part of a good risk management

policy, Boards and Audit Committees should be aware of this changing landscape and the possibility of reputational risk.

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