Chassman of AIG discusses global tax controversy

December 28, 2012

Nancy Chassman, Global Head of Tax Controversy at the American insurer AIG talks to T Magazine about the challenges she faces.

T Magazine: What is your role at AIG and how has it evolved during the past year or so? Is it likely to be the same in, say, five years’ time?

Nancy Chassman: As Head of Global Tax Controversy at AIG, I am responsible for providing leadership on global tax controversy matters and for working closely with senior management and our regional tax controversy leaders to ensure we are proactively and effectively managing our audits and tax litigation. In the past year, I relocated to London from New York to assume this newly established position and to set up a framework to implement a global tax controversy function.

One very important aspect of global tax controversy management is the enhancement of our relationships with tax administrators around the world. I believe that, through cooperation with tax authorities, we will mitigate tax controversy and resolve tax disputes in a timelier manner.

Today, we are operating in an environment where many tax authorities are aggressively expanding their enforcement activities and are also seeking ways to improve collaboration with large businesses to resolve tax disputes. Tax administrators are employing new mechanisms to better target resources to higher-risk taxpayers.

We see this in countries like Australia, which has instituted a risk-based differentiation framework, and the Netherlands, which has a horizontal monitoring audit process. The key to becoming a lower-risk taxpayer in these types of audits is transparency.

Many large companies recognize this changing global tax landscape and are proactively taking steps to develop relationships with tax administrators, which will ultimately lead to financial benefits.

Five years from now, I believe my role will have evolved to one of more strategic oversight, as we will have established a comprehensive global tax controversy platform. Additionally, I anticipate that we will have developed relationships with many revenue authorities, enabling us to resolve issues in a collaborative environment and a more timely way.

With tax authorities exchanging more information, do you find yourself fighting fires or are you able to develop policies that will benefit the corporation in the medium term? If so, how?

As part of this global trend of increased tax enforcement activities, we have seen more information exchange among tax authorities. My objective is to align AIG’s approach to tax controversy with these new realities of global tax administration.

As tax authorities expand their collaboration efforts, we continue to manage our global interactions and information requests with tax authorities in a transparent and cooperative manner aimed at seeking mutual resolution. However, it is important to understand and monitor how tax authorities interpret information provided to them and how it will be used for tax administration purposes.

By having a centrally managed global tax controversy function, we have more visibility into the big picture. As a multinational company, it would not be effective to have a siloed country-by-country approach to tax controversy when tax authorities are pursuing a more globally integrated strategy with multinational taxpayers.

How big an issue is transfer pricing (TP) in your dealings with tax authorities around the world? Why is it so controversial?

TP is clearly a high-priority compliance issue for many tax authorities today and, very often, it results in controversy and uncertainty due to the complex tax rules and varied interpretations of those rules. TP transactions are very factual and the issues that arise often require economic analysis where experts may disagree, particularly when applied against the local TP rules.

When tax authorities review our TP transactions, our approach is to provide the relevant TP documentation and work with the tax authorities to achieve certainty on the methodology and outcome. As more countries adopt Advance Pricing Arrangements, this is an excellent mechanism to obtain certainty
on TP.

For many international companies, controversy over tax is a question of governance and reputation. How does this affect your approach to the task, how you operate and who you report to within the corporation?

I report to the Head of Tax Risk at AIG and routinely interact with senior management. The AIG tax risk management function is aligned with our corporate governance policies and is an integral part of our corporate philosophy and operations.

My role as Head of Global Tax Controversy is to provide leadership on matters of global tax controversy and to champion the vision that AIG seeks to create and maintain a gold plate reputation with respect to tax policy and administration.

If tax authorities around the world continue to become more aggressive in their demands, will you have to become more adversarial in reply?

There are indications that tax enforcement around the globe is expanding and becoming more aggressive in some jurisdictions. I believe tax authorities and taxpayers have a mutual interest in promoting an effective and fair tax administration and we understand the role and responsibilities of the tax authorities.

An adversarial relationship is not productive for either party or the tax system. When
audits become contentious, it is important to stay focused on being cooperative and transparent.

About Nancy Chassman

Based in London, Chassman takes global responsibility for tax controversy for global insurance giant AIG.

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