Tax compliance has always been the cornerstone of the tax function of businesses. The timely filing of tax returns and payment of the underlying liabilities, the proper interpretation and application of tax legislation, and the effective response to tax audits often constitute the key indicators for assessing the effectiveness of a tax function.
However, in a modern environment where both compliance obligations and technological requirements are constantly evolving, the ongoing tax challenges faced by businesses are multifaceted. The digitalisation of tax administration, the continuous exchange of tax information between organisations (e.g. banks and electronic platforms) and jurisdictions, the use of big data analytics technologies, and increasing – but in any event, reasonable – demands for tax transparency (for example, as part of ESG) are leading to a redefinition of the tax function of each entity. In this context, compliance is evolving from a mere process into an integral component of the broader tax governance strategy.
In Greece, the tax administration has evolved from an organisation that relied primarily on ex post – and, to a large extent, delayed – sample-based audits into a structure capable of analysing data in near real time and with extensive coverage. The gradual universal implementation of electronic invoicing, the digital accounting records through which the tax bases reported in companies’ tax returns are reflected, the automated cross-checking of transactions and the application of risk analysis algorithms enable the tax authorities to identify discrepancies and assess the tax behaviour of businesses without requiring them to provide data or be physically present at their premises.
The myDATA platform is the most characteristic example of this development, while one of the recent developments at European level is the initiative for VAT in the Digital Age (ViDA), which provides for the full digitalisation of day-to-day processes relating to VAT. The combination of these developments is creating a regulatory framework in which tax compliance will increasingly depend on the quality, completeness and availability of data, rather than on the traditional fulfilment of filing obligations. Consequently, businesses are required to adapt as soon as possible to an environment of continuous tax compliance, in which the reliability of primary data acquires strategic importance.
It is therefore evident that tax governance is, in turn, evolving into a structured tax risk management system that goes beyond compliance with tax legislation. It comprises clearly defined roles and distinct responsibilities for each of the participants in the tax function of businesses, documented policies and procedures assessed through targeted internal control mechanisms, as well as systems for ensuring the quality of tax data that enable the continuous monitoring of tax risks.
In this way, the tax function is emerging as an integral part of the broader corporate governance framework, making it clear that tax risks form part of overall business risk and can affect not only financial performance but also the reputation and sustainability of each business.
These developments are also, naturally, transforming the role of the head of the tax function within businesses (Tax Director). Whereas traditionally this role focused on providing specialised tax advice and managing tax obligations, it is now increasingly taking on a strategic dimension.
The modern head of the tax function acts as a link between the finance function, internal and external audit, the tax authorities and management. At the same time, they play an active role in the design of information systems to ensure that the requirements of tax legislation are met, assess tax risks arising from business decisions already taken or to be taken in the future, and contribute to meeting new and more demanding obligations, such as ESG, at the core of which lies tax transparency.
At the same time, as a result of this interaction, the transition towards tax governance is similarly affecting the work of statutory auditors and internal audit functions. The assessment of tax risks is no longer limited to the examination of individual tax estimates and the simple confirmation that all known tax obligations have been fulfilled, but extends to procedures targeted at specialised tax matters, many of which require an analysis of the qualitative characteristics of large volumes of data.
In conclusion, in a constantly evolving tax environment, tax governance is not a best practice that businesses may potentially choose not to adopt immediately, but rather an important parameter for their effective operation. Organisations that invest early in ensuring the quality of tax data and developing comprehensive tax governance mechanisms gain increasingly significant advantages in terms of tax risk management, enhancing corporate credibility and adapting to contemporary requirements.
Therefore, the transition from tax compliance to tax governance does not merely represent a change in administrative processes. The change in terminology reflects a fundamental transformation of the tax function, which is evolving into a strategic pillar of corporate governance and overall business risk management.
