It is clear that companies increasingly look for ways to cut down costs and expenses at times of crises. Some businesses even stop investing in their own activities, in certain cases. As the names of more and more big players are involved in corruption and other scandals, there is ever growing concern as to the implementation of both internal and external control mechanisms within the corporate environment. The many examples of poor use of public funds and tax evasion reveal the lack of transparency and ethics in corporate routines.
Tax and accounting matters are key to ensure business integrity. Implementing a Compliance routine when it comes to the performance of tax obligations and compliance with accounting rules is mandatory for companies. The Brazilian regulatory environment has witnessed considerable changes in the past ten years, since the enactment of Law 11,638/07 and the implementation of international accounting rules and standards, execution of international treaties and conventions to exchange tax and economic information, and, furthermore, the implementation of several inspection procedures an tax liability control, translated into to increased requirement of tax returns and statements. In the meantime, Decree 8,420/15 regulated Brazil’s Anticorruption Law (Law 12,846/13) and refers to the so-called “integrity program”, whereby the Office of the Federal Controller General (CGU) determines companies must establish anticorruption rules and codes of conduct, to be fully disclosed to their employees, partners and stakeholders in general. In other words, there is no more room for amateurism.
Ancillary tax liabilities play a key role vis-à-vis transparency and support the inspection and control process of tax efficiency. Performing such obligations necessarily implies implementing appropriate governance practices, and operates as proof of business integrity and transparency, since transactions are clearly and unequivocally documented.
In line with such complex and broad context, businesses are looking further into the field of Tax Compliance, whish may ensure its practices do not violate municipal/local, state and federal laws – and also that their clients and partners have sound practices, thus avoiding possible financial and reputation losses in the market.
Independent tax compliance management ensures the necessary means and efficiency to minimize risks, preventing notices of deficiency arising out of the lack of knowledge and understanding of complex tax and fiscal issues. In certain cases, it may even result in financial gains related to legal reduction of the tax burden that had not been previously identified, as is the case, for instance, of the survey of and filing for tax credits.
From a broader perspective, business that already have operating Compliance mechanisms may become even more attractive for investors, clients and partners, thanks to the reliability and transparency offered by their advanced level of governance.
As several compliance, antifraud and risk management executives and university professors argue, “Investing in compliance is not a cost – for one cannot even imagine the cost of noncompliance”.
Managing Partner – Audit & Consulting