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Guidance on tax control frameworks (TCFs) was released by the Forum on Tax Administration (FTA) in 2016. It followed two earlier OECD publications (Principles of Corporate Governance and Guidelines for Multinational Enterprises) and seeks to assist businesses in designing and implementing effective tax governance. We fully support this FTA guidance. A full copy of Co-operative Tax Compliance - Building Better Tax Control Frameworks can be found on the OECD website.

Co-operative Tax Compliance - Building Better Tax Control Frameworks (OECD)

Summary of the OECD guidance on tax control frameworks

Top-down building block approach

The guidance assumes that the essential features of a TCF will be determined at the top level of an enterprise rather than being an amalgamation of individual decisions made lower down in the organisation as to which particular controls may be needed.

Rather than attempting to prescribe a one-size-fits-all TCF, the guidance identifies the following six essential building blocks of a TCF.

TCF building block Description

Tax strategy

This should be clearly documented and owned by the senior management of the enterprise (that is, the board of directors).


All transactions entered into by an enterprise are capable of affecting its tax position in one way or another, which means that the TCF needs to be able to govern the full range of the enterprise's activities and ideally should be embedded in day-to-day management of business operations.


The board of an enterprise is accountable for the design, implementation and effectiveness of the TCF of that enterprise; the role of the enterprise's tax department and its responsibility for the implementation of the TCF should be clearly recognised and properly resourced.


There needs to be a system of rules and reporting that ensures transactions and events are compared with the expected norms and potential risks of non-compliance identified and managed; this governance process should be explicitly documented.


Compliance with the policies and processes embodied in the TCF should be the subject of regular reporting, testing and maintenance.


The TCF should be capable of providing assurance to stakeholders, including external stakeholders such as Inland Revenue, that tax risks are subject to proper control and that outputs such as tax returns can be relied upon.

This is accomplished by establishing the entity's 'risk tolerance' and then by ensuring that their risk management framework is capable of identifying departures from that with mechanisms for mitigating/eliminating the additional risk.

The final building block, assurance, can be seen as the overall result of having put in place all the other building blocks; if they are there, it is possible to provide the desired assurance.

Application in New Zealand

We consider the FTA guidance applies not only to significant enterprises (in particular, those enterprises that currently file a basic compliance package with us), but also high wealth individuals (HWIs) who have complex business interests. We agree with the FTA that the actual specifics of a TCF for any business will depend upon the particular circumstances of that business and the industry in question.

In particular, at a minimum, we recommend that the following key questions be addressed routinely by boards and HWIs.

  • Is there a documented tax strategy and has it been kept up-to-date?
  • Have effective systems, procedures and resources been put in place to manage tax risks and, if so, is a clear statement made in the annual report to that effect?
  • Is annual reporting sufficiently transparent such that all stakeholders have the capacity to analyse and effectively interpret the information provided on taxes paid?

In setting the right tone from the top, we also recommend that boards of directors consider endorsing a set of overarching principles.

In addition, we recommend boards of directors of New Zealand companies consider the following questions in exercising their corporate governance function.

Question Checklist


Does the board have a well-documented overarching tax strategy?


Is this strategy actually followed in practice by the company's management?


Is the strategy and its implementation regularly reviewed and updated?


Does the company have a tax control framework to manage day-to-day tax risks?


Is senior management confident in the capacity and capability of the systems, procedures and personnel in place to achieve overall company tax compliance?


Is the tax or finance team on top of all relevant law changes (such as the anti-BEPS measures, the Common Reporting Standard and revisions to tax treaties)?


Does management report regularly to the board on potentially material tax issues and risks?


Has the operation of the tax control framework been tested independently in the last three years?


Is a clear statement made in the company's annual report as to tax governance?


Is annual reporting of tax payments and provisions sufficiently transparent for all relevant stakeholders to fully understand the company's overall tax position in New Zealand?

Last updated: 28 Apr 2021
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