Strategic Tax Management

ACT 123
Chapter 2
Chapter 2: THE SAVANT FRAMEWORK

 Learning Objectives
 Know the SAVANT Framework

Week 3
Chapter 2
CHAPTER 2: THE SAVANT
FRAMEWORK

Week 3
Chapter 2
Overview

 To produce revenue, investors should have assets. To increase firm value, managers engage
in transactions. Of course, firm value can increase for other reasons. On the other hand, for
every transactions that managers and owners would enter, there is always its invisible
partner – the government. In strategic tax management, when a firm chooses transactions,
it keeps tax management in mind. This transactions approach—the SAVANT framework

Week 3
                                                                                                             
Chapter 2
THE SAVANT FRAMEWORK

Strategy Anticipation

Value-Adding

Negotiating Transforming

Week 3
Chapter 2
Module Objectives

 At the end of the topic, the learner will be able to:

 Be able to use the SAVANT Framework to guide tax planning
 Know each element of SAVANT Framework At the end of the topic, the learner will be able to:

Week 3
Chapter 2
SAVANT

S – Strategy
A – Anticipation
V- Value-Adding
N- Negotiating
T- Transforming

Week 3
Chapter 2
I. SAVANT
S - STRATEGY
 Tax management should strive to enhance the firm’s strategy and should not cause the firm
to engage in tax-minimizing transactions illegally that deter it from its strategic plan. Tax
evasion as a willful act can be punished criminally here in the Philippines. A key to a
successful organization is having a simple yet effective strategy with efficient
implementation. One could think that in order not to pay taxes, the firm should also
minimize profits. Though it may be correct technically but this is one good example of
inconsistent strategy. From the business point of view, it may be aligned with SWOT
analysis, that is, matching Strengths and Weakness to business’ Opportunities and Threats.

Week 3
Chapter 2
I. SAVANT
S - STRATEGY
 A strategic management curves the firms path on where it wants to go. Typically, the firm’s
business-level strategy is typically detailed in operations-level, corporate-level, and
international-level strategies. At the operations level, the firm’s strategy involves gaining
advantage over competitors to create value for its customers through its products or
services. In its competitive analysis, the firm needs to understand whether it has a tax
advantage or disadvantage in relation to its rivals. Corporate strategy focuses on
diversification of the business. Ideally, diversification strategies improve the structural
position or process execution of existing units, or, in a new business unit, stresses
competitive advantage and consumer value. International strategy focuses on taking
advantage of corporate and business strengths in global markets. It requires an
understanding of local countries and relies on working with foreign governments..

Week 3
Chapter 2
I. SAVANT
A - ANTICIPATION
 As the firm curves out its strategy, they should also anticipate actions that may be done by
their competitors, markets and even the government. Tax firms are advising their client
based on what the government will legislate together with the market behavior. In short,
they are anticipating tax changes. For example, in anticipation of the implementation of the
TRAIN Law in January 1, 2018, most firms delayed their December expenses until
January to minimize the impact of larger tax rates. Firms should also attempt to anticipate
price effects resulting from tax changes. The magnitude of price effects depends on a
number of conditions. These include the elasticities of supply and demand and whether
additional suppliers can enter the market.

Week 3
Chapter 2
I. SAVANT
V – VALUE-ADDING
 Every goal of an effective tax management for each transaction should at least add value.
Financial Statement analysis, together with others, is one which the management can
derive if there’s value-adding. For example, if the net present value of cash flows is
positive, then for a certain period, will translate to positive financial earnings.
 On a year to year basis, investors as well as creditors monitor the firm’s financial
performance. Popular method would be the financial statement analysis such as Return on
Equity (ROE) and Earnings per share (EPS). However, both risk in business and tax law
changes should be taken into consideration. Therefore, it is correct to say that for value
adding purposes, this is somehow flexible and should be assess over time.

Week 3
Chapter 2
I. SAVANT
N – NEGOTIATING
 Negotiating tax benefits and costs is a function with the other who has also control on their
functions. That is to say, contracting with another which is not a governmental authority.
Before an entity enters into a contract with another, the firm’s tax management has to think
of how they can minimize their tax exposure legally by way of shifting burdens to another
or shared tax costs. This ability is called as tax shifting. This can be done by negotiating
purchase price and transacting with PEZA registered to enjoy their benefits, among others.

Week 3
Chapter 2
I. SAVANT
T – TRANSFORMING
 Tax management should effectively think of ways how to transform certain tax types to another.
Like for instance, a non-deductible expense to a deductible one, a taxable income to a gain and
expenses into losses. We have learned that losses on sale of capital assets are deductible only to
the extent that the company has capital gains. Ordinary losses cannot be, hence, deductible from
this. One could think converting their capital losses to ordinary losses.
TAX MANAGEMENT
 Effective tax management is putting all together the SAVANT Framework in all its endeavors and
important business transactions. This means the management has to assess from time to time the
change in tax environment to see what has change and eventually adjust the strategy. As discussed,
tax law changes in 2018 made a great impact in the tax environment. Tax rate changes has paved
the way for the adjustment of many firms in every industry to adopt. Taxes constantly evolve
through deliberate government policy and through administrative and judicial modifications and
interpretation. With Internet availability, important changes can be monitored constantly.

Week 3
Chapter 2 Assessment: CHAPTER 2: THE SAVANT FRAMEWORK

 Questions:
1. Explain the SAVANT Framework
2. How the FRAMEWORK works and applied in Tax management?
3. Provide at least 20 scenarios / cases where a company can apply and use the SAVANT
FRAMEWORK. Explain each case.

Week 3