Address uncertain tax positions immediately, Deloitte warns companies


Professional services firm, Deloitte, has again urged companies to address their uncertain tax positions immediately, in light of comments made earlier this week by the Australian Taxation Office (ATO) in a speech to the Australian Institute of Company Directors.

ATO Commissioner, Michael D’Ascenzo, stated on 16 February that a company’s uncertain tax position disclosure would be looked at in future ATO investigations.

Paul Fogarty, a Corporate Tax partner with Deloitte, said that the Commissioner’s position, while not unexpected, would result in Australian companies facing significant compliance challenges.

“The ATO has indicated that it will look closely at uncertain tax positions in financial statements as a key indicator of corporate tax risk. A clearly articulated strategy for addressing tax uncertainty comprehensively and promptly is therefore an immediate corporate governance consideration, with the ATO signalling a need for transparency from companies on this issue,” Mr Fogarty said.

“While no specific guidance has been made available by the IASB about the scope of the new disclosures, the Commissioner’s reference to similar disclosures in the US means that Australian companies could conceivably be subject to requirements similar to the FIN 48 pronouncement currently effective in the US.

“Our expectation is that the disclosures will require consideration of tax positions entered into in income years as early as 2009, and in some cases, earlier positions where, for example, transfer pricing or research and development claims are involved.

“While there is a lead time before the requirements will be formally introduced, these are significant commercial issues that all companies will need to consider,” Mr Fogarty said.

Melissa Sim, Accounting Technical partner with Deloitte, also urged entities to act quickly, despite the absence of formal guidance from the IASB.

“No tax system can deal with every possibility and permutation, so there will always be uncertainty. Boards and management of all companies will therefore need to consider the financial statement effect of both their current and future tax positions carefully, to avoid potentially onerous reporting consequences.

“With the ATO clearly focusing on uncertain tax positions, all entities should revisit their strategies and policies to address their inherent tax uncertainties,” she said.

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