Tax risk management and the multinational enterprise

The financial scandals in the United States and other countries ushered in financial reporting and corporate governance reforms that extend beyond the U.S. Sarbanes-Oxley Act of 2002 (SOX). These initiatives have increased the international financial community's awareness of the importance of risk management and internal controls. Tax risk management and related internal controls have been accorded less focus than risk management generally. The purpose of this research is to describe the current state of tax risk management of multinational enterprises (MNEs) by reporting survey responses from chief financial officers (CFOs) of U.S. and non-U.S. MNEs. The research shows that significant progress has been made by large MNEs in developing and implementing both general and tax risk management policies. The results provide guidance in identifying the loci and impact of organizational tax risk and indicate that respondents do not perceive alarming degrees of tax risk in their organizations. The study reveals a remarkable degree of similarity in U.S. and foreign firm responses and demonstrates, unexpectedly, that existing reporting structures enable CFOs to shift a significant degree of tax risk management to heads of tax.