Tax Control Framework vs Traditional Compliance Models

Many companies believe they are “in good shape” because they meet deadlines and have a solid management system. In reality, this approach falls under **traditional compliance**, focused on fulfilling obligations. The **Tax Control Framework**, on the other hand, is a model based on risk, governance, and structured processes.

How traditional compliance works

Traditional compliance is characterized by:

• a focus on **deadlines** and tax returns;
• controls that are often **ex post**, i.e., carried out after the transactions;
• redundant activities that are sometimes undocumented;
• responsibilities that are not always formally defined;
• a strong dependence on “key” individuals.

It is a model that can work up to a certain level of complexity, but it becomes fragile when the company grows or expands internationally.

The characteristics of the Tax Control Framework

By contrast, the TCF:

• starts with **mapping tax risks**;
• includes **formalized procedures and controls**, both preventive and subsequent;
• assigns **roles and responsibilities clearly**;
• integrates tax processes with accounting, controlling, legal, and HR;
• is based on reporting and tax-risk KPIs.

It is a model that transforms the tax function from an executor of compliance tasks into a **strategic partner to management**.

Which model is best to adopt?

It’s not about choosing “one or the other,” but rather about:

• **evolving** from traditional compliance toward a TCF;
• starting with the highest-risk areas (VAT, transfer pricing, withholding taxes, incentives/credits);
• gradually introducing procedures, controls, and responsibilities.

For groups with cross-border and intercompany operations, a TCF is no longer a “nice to have,” but a key element of long-term tax sustainability.

Daniele Di Teodoro
   managing partner