STRATEGIC TAX MANAGEMENT

Module 2: Basic Tax Management Concepts

MODULE 2

BASIC TAX
MANAGEMENT
CONCEPTS

Professor:
LOURENE BAUTISTA

Accountancy Department
College of Business Administration and Accountancy
De La Salle University – Dasmariñas

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STRATEGIC TAX MANAGEMENT
Module 2: Basic Tax Management Concepts

TABLE OF CONTENTS

Title Page
Gospel Reflection 3
Course and Topic Learning Outcome 4
Tax Planning vs. Tax Management 4
Tax-risk Management 5
Strategic Tax Management 6
Carrying Out the Tax Function 6
Enabling Assessment: Group Commentary on Real-World Tax Management 7
Issues

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STRATEGIC TAX MANAGEMENT
Module 2: Basic Tax Management Concepts

GOSPEL REFLECTION

Hebrews 5:7-9 NIV

7 During the days of Jesus’ life on earth, he offered up prayers and
petitions with fervent cries and tears to the one who could save him from
death, and he was heard because of his reverent submission. 8 Son
though he was, he learned obedience from what he suffered 9 and, once
made perfect, he became the source of eternal salvation for all who obey
him.

Instruction:
Using the space below, write an essay on how this Bible verse relate to your life?

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STRATEGIC TAX MANAGEMENT
Module 2: Basic Tax Management Concepts

Course Learning Outcome Topic Learning Outcome

CLO1. Explain the principles and TLO1. Understand the basic tax management
requirements related to Philippine corporate concepts
taxes

Tax Planning vs. Tax Management

You learned from previous courses that the taxes being collected by the government are
mandatory contributions towards the country’s revenue, which is imposed on the income or
wealth of persons or included in the cost of goods, services or transactions. Every person, either
natural or juridical, wants the tax liability to be minimum, and for this, the person can take
recourse to tax planning through which tax burden can be reduced to a minimum, by using legally
permissible ways and means.
Tax planning is often misconstrued with tax management, which is conversely the process of
systematically dealing with taxes. To further define tax management, its characteristics can be
compared with that of tax planning.

1. Comparison Chart
Basis for
Tax Management Tax Planning
Comparison
Meaning Tax management implies well-timed Tax planning devises a person's
and regular adherence to the tax financial affairs by taking advantage
laws and arrangement of financial of all the allowable deductions,
affairs, in a way that reduces the exemptions, allowances, and rebates,
taxes. legitimately, so that the tax liability is
the least.
Deals with Maintaining accounting records, Planning of taxable income and
filing of returns, audit of accounts investments.
and payment of taxes on time.
Objective To adhere to the provisions of tax To reduce the tax liability to a
laws. minimum.
Emphasis It lays emphasis on reducing taxes It lays emphasis on reducing tax
and penalties. liability.
Obligation It is compulsory for every person. It is not compulsory.

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STRATEGIC TAX MANAGEMENT
Module 2: Basic Tax Management Concepts

2. Definition

Tax planning can be understood as the practice of minimizing tax liability by making the effective
use of all applicable allowances, deductions, exemptions, concessions, and rebates, within the
framework of tax laws, to lessen the overall income and/or capital gain of the person. For this
purpose, the financial activities of the person or entity are thoroughly analyzed to seek the
maximum possible tax benefits or savings, which is legally feasible per tax laws.

On the other hand, tax management connotes the effective management of finances of a
person, to file the returns and pay taxes on time while regularly and timely complying with the
provisions of the relevant tax laws and related rules and regulations, so as to avoid the
imposition of penalties.

Tax management is the complete management of tax-related activities, that took place at any
point in time, as in:

 Past: Assessments conducted by tax authorities, legal proceedings, amendment of tax

returns
 Present: Proper maintenance of the books of accounts, getting the accounts audited,
preserving documents that support the transactions, timely filing of tax returns and
required attachments, withholding tax at source
 Future: Taking corrective actions and planning investments to save taxes.
However, in practice, the concept of tax management often encompasses tax planning and
elements of the tax value chain.

Tax-risk Management
It is another essential feature of the tax value chain that deals with the development of a tax-
risk policy that indicates the acceptable level of tax risk, as well as monitoring of and responding
to such risk, which should be embedded in the corporate government of an enterprise.
The following are the main and interlined tax risks:
 Transaction risk
 Operational risk
 Financial accounting risk and tax process risk
 Compliance risk

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STRATEGIC TAX MANAGEMENT
Module 2: Basic Tax Management Concepts

Strategic Tax Management

Strategy, as defined by Alfred DuPont Chandler, whose wrote extensively about the scale and the
management structures of modern corporations, is the determination of the long-term goals and
objectives of an enterprise, and the adoption of courses of action and the allocation of resources
necessary for carrying out those goals. Therefore, tax management involves determination of tax
strategies that should be aligned with the enterprise’s over-all corporate strategy.

Carrying Out the Tax Function

The tax function in most of the companies is usually being carried out by a dedicated tax
department or team, but its organization varies depending on business scale and budgeted cost
of the tax function.
The said department or team, which is typically composed of tax accountants and lawyers, is
either within the company’s financial management or controllership function, or a separate
group but still interlinked with the functions mentioned. Moreover, as part of the tax function
and in support of tax-risk management, the tax department or team works closely with the
company’s legal counsel/s and external tax advisors.
For enterprises that operates on a global scale, local tax departments or teams report to a global
finance or tax group.

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STRATEGIC TAX MANAGEMENT
Module 2: Basic Tax Management Concepts

Assessment Title: Commentary on Real-World Tax Management Issues

Assessment Type: Enabling Number: 1 Est. Duration: 45 minutes
Understand the basic tax management concepts and
Outcome Assessed: incorporate in personal view on real-world tax management
issues

Total Points 20 Points Received Grade

Instruction:
Kindly search for a news article concerning a local business enterprise that is being
questioned/was questioned by any of the Philippine tax authorities with regard to its tax
practices, and come up with a commentary on (1) how the said business enterprise handled/is
handling the said matter, and (2) on either the progress or outcome of the tax authorities’
assessment. (3) In the commentary, incorporate any of the tax management concepts that were
discussed in this module.

Rubric:

Needs
Criteria Points Poor Good Excellent
Improvement
2 topics All 3 topics
No topic was Topic 1 was
were were
Commentary on commented commented
15 pts commented commented
topics properly satisfactorily
satisfactorily satisfactorily
(3 pts) (8 pts)
(12 pts) (15 pts)
Not clear and
Very hard to
needs to be Clear and Very clear and
understand
Skilled read more than able to use good
5 pts and many
Communication once to be English command of
grammatical
understood (3 (4 pts) English (5 pts)
errors (1 pt)
pts)

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