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Consulting on Controversy: Johan van der Walt

Saturday, 14 June 2014   (0 Comments)
Posted by: Author: Yolande Botha
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Author: Yolande Botha (SAIT)

Q: What are the biggest issues currently on the tax controversy landscape? 

A: Worldwide governments are cash-strapped, seeking to extract more tax revenues to counteract fiscal deficits. There are currently some mutually reinforcing "themes” in the tax controversy space: Firstly, there are more aggressive audits/ investigations by revenue authorities including direct measures aimed at counteracting what tax authorities regard as unacceptable tax structuring (e.g. the OECD’s BEPS initiative with its 15 action plans). Secondly, there is the renewed clampdown on so-called tax havens. Thirdly, one sees a forceful push for greater transparency with regard to corporate tax information (e.g. country-by-country reporting) and an attack on bank secrecy used by High Net Worth Individuals (e.g. the USA’s FACTA legislation and the attacks on Swiss banking secrecy). Lastly, the tax affairs of a multi-national company can no longer be treated as a purely internal / domestic issue – civil society, non-governmental bodies and aid agencies now all take an interest, often creating negative perceptions and reputational risk for companies that are viewed as overly tax aggressive. For example, following the 2013 picketing of its shops in the UK, Starbucks recently reported its first UK sales drop. The consumer now sits in judgment of the tax policies applied by large multi-nationals. This has induced companies to reconsider how they manage tax risks.    

Q: How do you see tax controversy? Do you prefer to take a proactive or reactive approach? 

A: Tax risk management on a reactive basis means dealing with the fall-out once it has happened and the damage (e.g. reputational) has already been done. All tax controversy literature rather advocates a pro-active approach to tax risk management, i.e. the board and audit committee should take the lead by upfront setting the tax philosophy that governs the company’s tax risk appetite, how tax controversy would be dealt with, etc. One can e.g. find Vodafone’s comprehensive "Tax risk management strategy” document on the Internet. Tax can no longer be managed purely as a back-office function. 

Q: How has your advisory role evolved as tax controversy has become more prominent in global debates? 

A: The tax controversy market is clearly growing and there is a strong need for services to resolve long-running, acrimonious and costly tax disputes. The aim should however be to prevent tax disputes and controversy from arising in the first place.    

Q: You worked at SARS for a significant period of your career. This implies that you have a very distinct understanding of the links between civil society and public service. How do you see your role now in corporate practice? 

A: Globally many individuals working in the tax controversy area would have had some past revenue authority experience. Comments are sometimes made that a move from the revenue authority into corporate practice equates to moving over to "the dark side” which is unfortunate. But, it has its advantages and, rightly or wrongly, brings some credibility when engaging with clients. 

Q: What strategic decisions do you need to make when dealing with issues related to tax controversy?

A: Strategy is key with regard to tax controversy. Know when to push hard and when to back down and settle. Wrong strategy equals a sub-optimal outcome for the client. Any revenue authority has a captive market so at all times it’s important that a constructive and professional interface be maintained with revenue officials.  

Q: How did you first get your foot in the door at the start of your career in tax? 

A: I joined SARS as a tax lawyer and progressed from there.

Q: What were the most important decisions that you made when it come to laying the foundation for your future career growth?

A: Tax is unique insofar as it combines law (the interpretation and application of tax legislation) with the financial side (as evidenced in the Balance Sheet and Income Statement). You need to navigate both the afore-mentioned in practicing tax. This has made tax a specialist area and might have prevented it from becoming over-traded. In addition, the constitutional and administrative law aspects are now coming to the fore (e.g. the recent Tax Administration Act). Tax disputes and controversy involve all these elements.     

Q: What has been the biggest career challenge that you have faced thus far? What opportunities and lessons did you take away from having faced this challenge?

A: The move from SARS into the fee-writing advisory world has been both interesting and worthwhile. Having been on both sides of thee divide brings perspective. Revenue authority staff moving into practice (and vice versa) has benefits and should be encouraged.    

Q: What do you enjoy most about the kind of work that you do?  

A: Globally tax controversy is on a growth trajectory and, going forward, should deliver interesting opportunities. Although it has taken a while for tax controversy to really hit the SA shores we shall in all likelihood see more people and practices move into this area locally. Being part of an evolving area in tax, which is bound to develop strongly in coming years, is exciting.   

Q: How do you manage to balance your work and your personal life?

A: Our little ones (Lize 9 and Nic 7) and my wife Elmarie make it easy to remember what is really important in life. Otherwise life becomes too taxing!  

This article first appeared on the May/June edition of Tax Talk.



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