Risk Management and Corporate Governance
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Risk Management and Corporate Governance

Interconnections in Law, Accounting and Tax

Edited by Marijn van Daelen and Christoph Van der Elst

In reaction to the recent financial crisis and corporate failures at the beginning of the millennium, the emphasis of the business community in corporate governance has shifted towards internal control and risk management issues. As a result, risk management discussion has reached an unprecedented level for academics and practitioners alike. This international, multidisciplinary book provides a comprehensive overview of the risk management landscape, encompassing its challenges and problems and taking stock of its influence on both companies and society as a whole.
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Chapter 5: Risk Management in Taxation

Ronald Russo


Ronald Russo HISTORICAL DEVELOPMENT For a company, taxes in principle constitute costs. Costs are generally to be minimized, within the limitations of the relevant laws. This also applies to taxes. The relevant tax laws define the obligations of the taxpayers: generally this entails administrative obligations and the actual payment of taxes due. Governments regard taxation, amongst other things, as a principal source of finance for the public sector, whereby every company has to pay its fair share of the total tax burden. Tax laws are the means by which governments practically implement the shift of funds from private companies to the public domain. Taxation is a major factor in determining the net result of a company. As will be described below, it is not always easy to determine the exact amount of taxes due in the commercial accounts of a company. The risk that the amounts are not correct and the management of this risk will be discussed in this chapter. The oldest taxes are generally considered to be custom duties and some forms of indirect taxes1 levied from producers or importers of goods. These taxes were treated as part of the cost price and in this way the public paid their taxes without exactly knowing how much as they were hidden in the price of the product. Apart from the obscurity of the amount of tax actually paid, taxes on consumption were also felt not to evenly spread the tax burden, as persons with more income do not proportionately...

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