A Proactive Approach to Tax Risk Management

With Inland Revenue reviewing decisions retrospectively and with the benefit of hindsight, organisations must be able to demonstrate that tax obligations have been met accurately, positions are defensible, and judgements are well supported. A structured tax risk management framework provides management and boards with confidence that tax risks are identified, understood, and appropriately managed.

Effective tax risk management moves an organisation from reactive issue‑handling to embedded, forward‑looking decision‑making - supporting resilience in a constantly evolving regulatory landscape.

Key Strategies for Effective Tax Risk Management

1. Fit‑for‑Purpose Tax Governance

A clear tax governance framework is the foundation of effective tax risk management. It should be proportionate to the organisation’s size, complexity, and risk appetite, while defining how tax decisions are made and overseen.

Key elements include:

• Clear oversight and accountability, with defined roles from preparation through to review and sign‑off
• Documented tax policies, including how much risk the organisation is willing to accept, what issues are significant enough to flag or escalate, who makes key decisions and how Inland Revenue is approached
• Integration with enterprise risk management, ensuring tax risks are assessed consistently alongside broader business risks

Strong governance ensures tax risk is managed transparently and in line with commercial objectives.

2. Robust Processes and Documentation

Well‑designed processes and disciplined documentation are critical for both compliance and defensibility.

Leading practice includes:

• Standardised end‑to‑end processes for tax filings, reducing errors and ensuring continuity through personnel changes
• Contemporaneous documentation supporting key tax positions, including facts, analysis, and judgements
• Data integrity controls, such as reconciliations and validation checks between source systems and tax calculations
• Compliance with statutory record‑keeping obligations, including retention of records for at least seven years

Good documentation is often decisive when Inland Revenue reviews prior‑year positions.

3. Regular Risk Testing and Independent Review

Tax risk is dynamic and must be revisited as laws, business operations, and Inland Revenue practices evolve.

Effective organisations:

• Conduct targeted internal reviews of known risk areas such as GST, FBT, and transfer pricing
• Perform scenario and sensitivity analysis for material or uncertain positions to quantify potential exposure
• Periodically engage independent external reviewers to assess governance, controls, and technical positions, and to identify issues early - before they escalate

Regular testing provides assurance that controls remain effective, and tax positions remain robust.

4. Certainty for High‑Stakes Transactions

For complex, high‑value, or novel arrangements where tax outcomes are critical, a binding ruling from the Commissioner of Inland Revenue can be an effective risk mitigation tool.

While rulings require full disclosure and a commitment of time and cost, they provide certainty and can be invaluable where tax risk must be resolved before proceeding.

5. Ongoing Engagement with Trusted Tax Advisors

Effective tax risk management relies on proactive, ongoing dialogue with experienced tax advisors - not just year‑end compliance support.

This includes:

• Staying ahead of legislative and Inland Revenue developments
• Using advisors as a sounding board for transactions, restructures, and strategic decisions
• Navigating grey areas, including assessing whether positions meet the “about as likely as not to be correct” standard and identifying appropriate risk mitigations

Early engagement allows risks to be identified and managed before they crystallize.

6. Additional Practical Measures

Organisations can further strengthen their approach by:

• Maintaining a tax risk register with clear ownership and mitigation actions
• Investing in tax technology to improve accuracy and efficiency
• Promoting cross‑functional collaboration, ensuring tax considerations are embedded in commercial decision‑making
• Supporting continuous training for finance and tax teams to build internal capability

How Andersen Supports Tax Risk Management

Tax risk management is not one‑size‑fits‑all. We work alongside clients to design practical, proportionate frameworks aligned to their business, industry, and risk appetite.

We support organisations by:

• Developing or enhancing tax governance frameworks and policies
• Reviewing processes, controls, and documentation through targeted health checks
• Identifying and quantifying priority risk areas
• Supporting proactive engagement with Inland Revenue, including binding rulings
• Acting as an independent, commercially focused advisor on complex or high‑stakes transactions

Our goal is to provide clarity and confidence - helping management and boards understand tax risks, options, and trade‑offs so informed decisions can be made.

Get a clearer view of your tax risk and what to do next

We provide practical, independent insight to help you strengthen your approach with confidence. Get in touch to start the conversation.