Financial services companies looking to create a competitive advantage should be reviewing their tax management strategies as a way to deliver greater value to shareholders according to Neil Ward, Deloitte Financial Services Tax Leader.

“The financial services sector has been under unprecedented structural, regulatory and market-driven change over the past few years and it’s quite feasible that while keeping up with this change, the opportunities to leverage the tax advantage have been overlooked,” Mr Ward said.

“Tax can be difficult to manage and categorise.

"A mix of routine compliance and ad hoc transactions means that companies have to manage the predictable and the unpredictable.

“Taking time out to consider the overall picture, to discover new opportunities for cost savings delivered from a robust tax strategy and risk management framework, is a strategy companies in the financial services sector can no longer afford to overlook.

“Tax, for example, can play a key role in achieving efficiencies in the business in enterprise risk management, customer relationship management, IT, mergers and acquisitions, regulatory compliance and human resources, as well as accounting and reporting.

“Companies should consider where they are undertaking their research and development for instance and when making IT investments, given the significant cash benefits available under many of the global R&D tax incentive regimes, leveraging the right domain can offer considerable advantage,” Ward said.

“While Australia, New Zealand and China have recently changed their rules, many other countries in the Asia Pacific region are working on making changes to their regimes to be serious players in a very competitive global R&D marketplace.

“But knowing which R&D regime can work out best and when, does need good advice and considered planning.”

Mr Ward said another area where tax can deliver considerable savings is in harnessing technology to for instance automate Goods and Services or Value Added Tax systems.

This can help an entity both identify gaps and ensure regulatory compliance.

“Automating GST systems has delivered great results for many companies as these smart programs interrogate your systems and seek and find transactions that are not being captured or dealt with appropriately.

“This is a potential area of growth and one where we’d expect financial services companies to find considerable benefit.”

In global professional services firm, Deloitte’s recent research, Triggering the Tax Advantage, the need to embrace ongoing cost reduction covers:

• Balancing cost reduction and service through a targeted approach
• fostering continuous improvement
• leveraging technology
• streamlining IT infrastructure
• rationalising compliance and
• offshoring.

In the Human Resources field the increasing number of international short and medium term executive assignments comes with hidden tax costs.

“This means that companies need to consider timing and packaging in these areas to trigger the appropriate tax advantage and comply with the necessary regulations and treaties.

"Sometimes it can be as simple as tracking,” said Ward.

To read a copy of the full report, click here.