Indirect tax management at Philip Morris InternationalJune 20, 2012
As Director of Indirection Taxation for Philip Morris International (PMI), the global tobacco firm, Robert Langham is responsible for all aspects of the company’s indirect tax management. Here, he speaks to T Magazine about how the company’s approach to indirect taxes has changed in recent years and how the company manages its indirect tax risk profile.
T Magazine: In what ways has PMI’s approach to indirect taxes changed in recent years?
Robert Langham: It comes down to two things. First, a desire to manage indirect taxes more effectively.
Second, we’ve gone through a lot of business process change and centralization that has required us to take a look at how we’re managing a lot of these taxes, as we move back-office finance functions to shared service centers. This basically requires you to reassess how those transactional taxes are being administered.
What are some of the things you’ve done to manage indirect taxes more effectively?
We’ve placed all of our taxes within a strong tax risk management and control framework so that we have good risk assessment processes, decision-making and escalation processes and internal control review mechanisms to see how things are working.
And we have been able to improve processes over time. We have implemented a lot of enterprise resource planning (ERP) tools and non-system tools as well, such as a global database that provides guidelines on best indirect tax practices, benchmarking against other companies and so on.
PMI deals with a wide range of indirect taxes. How does this fact impact management of the tax function?
VAT, which most people think of as “the” indirect tax, is sort of in the middle of the field for us in terms of its size. Administratively, it’s definitely one of the most burdensome taxes, but obviously, dealing in excisable goods, there’s an administrative burden for the excise and other consumption taxes as well.
We look at them somewhat together, since excise is nothing but a glorified VAT on a particular good. One challenge is that the bases, trigger points and reporting requirements for each of these different taxes can be quite different.
One of the most difficult aspects is trying to manage the business processes so that you pick up all these tax trigger points and bases and can reconcile them.
At PMI, how does the indirect tax function interact with the rest of the business?
We’re quite lucky here; we have one tax department that covers all taxes. And we’re extremely lucky in that the business unit affiliates look to us for guidance when they’re entering new lines of businesses or launching new kinds of products or setting up businesses.
They’re quite responsive to our input. Part of that is probably because of the high profile that compliance takes at our company. But we’ve also done a lot of stakeholder outreach over the years, to try and make sure that we build and maintain those links.
Also, as new business lines and new operations get developed, we actively go out and try and make sure that they know who we are and what we’re doing and how it might impact them, or how what they’re doing might impact PMI’s overall tax risk profile.