Ongoing discussions of corporate tax reform in Washington continue to focus on shaving a few points off the income tax rate. Would that be enough to restore the nation’s global tax competitiveness? Peter Merrill doesn’t think so. Merrill, principal and director of national economics and statistics with PwC’s Washington National Tax Services practice, believes that any rate cut should go much deeper, and has also argued in favor of increased reliance on consumption taxes (such as a value-added tax, or VAT – an option that, to say the least, hasn’t had an enthusiastic reception from corporate leaders). I asked Merrill for his take on the current state of play. more

At this time each year, teams of corporate accountants work fervently to close the books on last year’s financial results. APQC’s benchmarking metrics show that some teams struggle mightily under the weight of this challenge, while others seem to move deftly through the steps.

What follows is a view of performance gaps (cost-efficiency and productivity) that pertain to the financial management process defined as General Accounting. You will immediately see wide disparities. The data comes from a grouping of 217 organizations that have measured their performance relative to peers using APQC’s Open Standards Benchmarking database.

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The United States has a “voluntary” tax system, which means that taxpayers must compute their own tax liability and report (and pay) it to the IRS. Unfortunately for Uncle Sam, not everyone volunteers. The result is a “tax gap” — the difference between tax liability imposed by law for a given tax year and the amount of tax actually paid. For calendar year 2001 (the most recent year for which data is available), the IRS estimated the tax gap (prior to any enforcement activities) at around $345 billion. That’s a 16.3 percent noncompliance rate.

One approach that Congress has used to close the tax gap has been to impose additional requirements for reporting information to the IRS. These requirements often get little publicity and can catch taxpayers by surprise. One recent example is new Code section 6045B, enacted in 2008 and effective January 1, 2011.

This provision requires any issuer of stock or indebtedness to file a return within 45 days describing any organizational action that affects the basis of that security. It must also describe the quantitative effect on the basis of the security resulting from the action.

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The focus of many risk management programs today is to avoid risk or, at the very least, to minimize risk to its lowest level. While that may seem like a rational approach given the economic crisis we have just experienced, it is not necessarily a wise approach. One of the greatest risks to any company is its failure to continually innovate. Examples abound of companies that did not continue to question how to create new products or deliver new services to meet the fickle demand of consumers. Once wildly successful companies like Blockbuster Video or America Online have seen their fortunes turn very quickly as other companies have invested in new delivery channels. more

If nothing else, the past few years have shown us just how volatile prices, demand, and exchange rates, to name just several variables, can be. A few examples: The U.S. dollar has fluctuated by about 20 percent against the euro over the past year, while crude oil topped $140 per barrel in mid-2008, only to fall to about $60 in early 2009.

On top of that, the changing nature of many firms’ business models means that they’re taking on additional risk, says Amol Dhargalker, director of corporate advisory services with Chatham Financial. For instance, firms whose markets and suppliers used to be primarily based in North America now may be spread across several continents. The additional exposure to fluctuating exchange rates may not have been a significant cause for concern while sales were increasing at a heady pace. However, when many customers began slamming on the breaks a few years ago, the risks became harder to overlook, Dhargalker notes. Firms realized that “this is an area where we can make an impact and that we need to pay attention to.” more