Interview with Christoph Huber, OC Oerlikon & Marting Lagarden, Henkel AG & Co.
Due to globalization, the importance of transfer pricing is growing and new changes and issues are arising every day. With the strongest agenda on the market and the best speakers on board the 3rd Annual Corporate Tax Forum, will tackle the most timely and relevant corporate tax matters impacting multinational companies.
The interview outlines some of the primary effects upon tax function of the current global situation. Compare the answers of the two tax experts:
Senior Vice President, Head of Group Tax, OC Oerlikon, Switzerland
|Dr. Martin Lagarden MBA
Head of Global Transfer Pricing
Henkel AG & Co. KGaA
FCS Global Tax Group
Today’s uncertain economic climate and the time of considerable change had an impact upon everybody. What do you see as being the primary effects upon tax function of the current global situation and how is this function adapted to cope with the pressures?
CH : The impact of the economic development is that tax authorities are looking for ways to stabilize their income to make it less volatile. It can be observed that utilization of tax loss carry forwards is limited, tax rates go down but the tax basis is getting broader. Furthermore the source countries take more aggressive positions and tax auditors are sent out to “squeeze” the lemon. Therefore, the focus of the tax function is changing more and more to compliance. “Tax planning” for the sake of minimizing taxes is expected to be less relevant whereas the managing of tax audits and preparation of documentation is getting more important. Business must be guided to the tax jungle without falling in a trap. The tax function must prepare for this new environment.
ML: Tax function as it stands today needs to cope with more frequent and more demanding requests from – and dealings with tax authorities on an international scale, despite constant pressure on own capactities. This will require a reconsideration of priorities, as well as a more effective and efficient resource allocation. A more interdisciplinary approach to tax team staffing and the establishment of supportive centers of expertise may help to better adapt to a rapidly changing business environment. Also, it should not be lost out of sight that more aggressive tax planning
inevitably involves higher risk taking and uncertainty about the company’s future tax position, while transparency and improved compliance can help to build better and more sustainable relations between tax payers and tax authorities, going forward.
Looking at your organisation, what kind of transformations or strategies have you implemented when dealing with these pressures? What do you plan to do in the near future?
CH: We have started an intensive dialogue with the business to increase their awareness about tax issues, to ensure that the tax function is involved early enough into business decisions. As tax advice is based on trust this is only possible based on a professional dealing with each other. Therefore, we invest significant time in relation management and do not wait until we are consulted but approach the business proactively.
ML: We are trying to balance our internal capacities and the employment of external advice in a more efficient way. Centers of expertise also play a role in that context.
What are the global trends and challenges ahead of us in international taxation? And what your primary ambitions?
CH: Reference is made to question 1 regarding global trends. Furthermore we see the trend of transparency. Exchange of information between tax authorities is increasing and on its way to being automized. Tax planning today must be based on transparency and consistency, i.e. the facts must be prepared in a consistent way to any tax authority. Our ambition is to follow this path.
ML: The focus on intangibles in a transfer pricing context will continue to increase over the next 2 – 3 years, in parallel to OECD’s work on TPG chapter VI review. At the same time, we will see an increase in the employment of international dispute resolution mechanisms like APAs and MAPs. I will be active in both areas. It will also be highly interesting to follow the position adopted by and practical approaches of BRIC countries
with respect to the areas mentioned.
What is the story beyond your decision to pursue career in tax and what do you find as the most interesting aspect of this profession?
CH: Tax is a multidimensional field of activity. It combines legal and economic aspects, going from tax law and commercial law over accounting and treasury to controlling and also business decisions. For a proper tax assessment the tax consultant must have an understanding of the economic reasons and also have the technical knowledge of the tax laws. I’m not aware of any other function which is so broad and which requires so many cross-functional skills. Very often tax functions ends up with having the lead of projects as it is the only one which need knowledge of all workstream for a comprehensive assessment of the tax consequences. The inhouse tax counsel gets much deeper insights into decision making than any external consultant as he is truly part of the organization and not paid based on time spent but based on outcome. The biggest fun is the continuous challenge in an international environment.
ML: I am (and have always been) interested in exploring new fields and learning more about how things really work together in theory and practice. This is also reflected in my CV, which combines different subjects like R&D, economics and management. In this respect, working in tax and transfer pricing, in particular, provides a uniquely challenging and highly interesting mixture of economic principles’ application and practical business decison making. It just never gets boring …
If you have another question on Christoph Huber or Dr. Martin Lagarden, feel free to ask it them at the upcoming 3rd Annual Corporate Tax Forum.