Building a Tax Governance Framework: A Practical Guide for in-house Tax Managers
As in-house tax managers, we often get handed responsibilities that push us beyond what we are used to. When I was first asked to create a Tax Governance Framework for my organisation, I had no practical experience in this area. To be honest, it felt overwhelming, and I am sure many of you can relate to that feeling.
Through my experience of building a tax governance framework from the ground up, I developed a roadmap, which I believe can serve as a blueprint for fellow tax managers. Whether you are tasked with designing and implementing a tax governance framework from scratch or simply looking for a structured approach, this roadmap lays out clear, actionable steps to guide you through the process. My hope is that this blueprint will provide you with the direction and clarity you need as you navigate the challenges of building a robust tax governance framework for your organisation.
Tax Governance Framework Roadmap
1. Define the Tax Governance Framework
The first step is to build a strong foundation by defining your organisation’s Tax Strategy, Policies, and Governance Objectives. You need to think about how the tax function aligns with your broader business strategy and risk management goals. Some important questions to ask:
- What are our tax objectives? (e.g., compliance, risk reduction)
- How does the tax team support the company’s overall governance goals?
2. Clarify Roles and Responsibilities
An effective framework needs everyone to know their role. This is where I used a RACI matrix— a simple tool that assigns Responsible, Accountable, Consulted, and Informed roles for each task. Below is an example of how I structured the RACI matrix for key tasks in our tax governance framework:
| Task | Responsible (R) | Accountable (A) | Consulted (C) | Informed (I) |
|---|---|---|---|---|
| Define Tax Strategy | Tax Manager | CFO | Finance, Legal Teams | Board of Directors |
| Document Processes & Controls | Tax Compliance Team | Tax Manager | Treasury, Legal | Finance Department |
| Review & Sign-off on Tax Returns | Tax Manager | CFO | Internal Audit | Board of Directors |
| Internal Audits of Tax Compliance | Internal Audit Team | CFO | Tax Compliance Team | Finance, Legal Teams |
| Communicate Tax Risks to Board | Tax Manager | CFO | Internal Audit | Board of Directors |
By breaking down tasks this way, we ensured that everyone involved knew exactly what their role was, whom to consult, and who needed to be informed. This gave clarity to the entire team and ensured nothing slipped through the cracks.
3. Establish Documented Processes & Controls
Once roles are clear, you need to document the processes and controls that support tax decision-making. These should include key checkpoints to manage tax risks. Ask yourself:
- Are the controls we have set addressing the right risks?
- Are there gaps in our current processes that need to be filled?
- How are we managing audits, tax filings, and compliance?
4. Make the Framework Operational
This is where things start to get real. You need to embed the framework into the organisation’s daily activities, making sure it’s something that is continuously monitored and adjusted as needed. Key steps at this stage include:
- Training your team on their roles within the framework.
- Setting up systems to monitor tax compliance in real-time.
- Creating a feedback loop to make sure processes are regularly updated.
5. Develop a Testing & Review Plan
It’s one thing to set up a framework, it’s another to ensure it works. You need to create a formal plan for testing your controls and processes through regular reviews, internal audits, and possibly third-party validation. Things to keep in mind:
- What will the scope and frequency of internal audits look like?
- How do we regularly test controls to make sure they are effective?
- How do we adjust controls when audit results reveal new risks?
6. Provide Assurance to Stakeholders
Finally, you need to give both internal and external stakeholders confidence in your framework. You can do this by providing solid evidence that your controls are working, processes are being followed, and that the framework is delivering results. Some steps to consider:
- Producing reports for senior management and the board.
- Use these reports to demonstrate compliance and governance to external stakeholders, such as auditors and tax authorities.
Why am I sharing this?
Because I have been where many of you might be right now navigating through unfamiliar territory and not quite sure where to start. My hope is that this roadmap will offer some clarity and direction to in-house tax managers who are being asked to put a tax governance framework in place.