Role of boards in overseeing tax risk
Boards of listed companies face mounting pressure to demonstrate robust oversight of tax governance, risk, and compliance. International frameworks, such as the OECD Tax Control Framework and national regimes, particularly Australia’s, are setting increasingly high expectations for board accountability and transparency.
Best practice today is defined by active board engagement, including a documented tax risk appetite, defensible governance frameworks, regular operational testing, and alignment with broader corporate governance and ESG objectives.
Among global standards, Australia’s requirements are the most exacting, mandating continuous operational assurance, transparency, and proactive board involvement.
Board Roles and Global Standards
Boards are responsible for setting tax risk appetite, endorsing governance frameworks, and ensuring compliance and transparency. International guidance — such as the OECD’s justified trust and frameworks in the UK and Singapore — highlights three recurring principles:
- Documented strategies and board-approved risk appetite.
- Integration of tax into enterprise risk and ESG frameworks.
- Regular reporting to the board and transparent public disclosures.
Australia’s justified trust regime goes further by requiring:
- Board-endorsed tax control frameworks across all tax types.
- Explicit, operationally tested roles at all levels, including the board.
- Ongoing public disclosure and independent assurance of controls.
The Position in Singapore
- Singapore’s tax governance regime has advanced, with the embedding of board responsibility in governance codes and voluntary initiatives such as IRAS’s Voluntary Tax Governance Framework. The SID and MAS emphasise “tone at the top,” requiring boards to oversee and regularly review tax policies and risks.
Key Recommendations for Boards
- Adopt a Documented Tax Risk Appetite: Articulate and periodically review tax risk appetite, aligned with strategy, stakeholder expectations, and regulatory standards.
- Implement a Formal Governance Framework: Oversee a comprehensive, documented framework across all tax types, with independent effectiveness reviews.
- Mandate Operational Testing and Assurance: Commission real-time, independent testing of controls, following ATO best practice, to ensure frameworks work in practice.
- Ensure Board Visibility Through Reporting: Require substantive, regular updates on exposures, control effectiveness, and significant issues.
- Disclose Strategy Publicly: Publish board-approved tax strategies and summaries of oversight in annual reports to demonstrate transparency.
- Integrate Tax with ESG and Enterprise Risk: Embed tax oversight into ESG and enterprise risk programs, reflecting its growing weight in investor expectations and market reputation.
Get In Touch
For more information please contact Michael Velten.
michael@veltenadvisors.com
+6590687547
37 Ann Siang Rd, Singapore 069715
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