The asset manager's new normal: responding to tax risks and transparency

Download the survey PDF downloadAdobe PDF Format

The backing of the exchange of tax information between all countries by the G20 summit will have a massive impact on the industry including enabling developing countries to hunt down unpaid tax. In our survey and video, we explore on the current effectiveness of the industry’s management of tax risks associated with the fund business model.



Continuing regulatory and taxation reform, fiscal deficits, low growth, sovereign risk, and globalisation are unlikely to be viewed merely as short to medium term consequences of the financial crisis. The asset management industry is facing opportunities and challenges in the form of demographic shift, the rise in power and interconnectivity of the emerging markets, changing investor behaviours, technology and social media and state directed approaches to economic development.

Tax authorities continue to combat under reporting of income by some taxpayers and in particular, the use of ‘offshore’ investments. There is an increased emphasis on transparency and cooperation between governments. Extensive tax reforms that are emerging from many countries, including the US Foreign Account Tax Compliance Act (FATCA) EU FATCA, EU Savings Directive and bilateral exchange of information. Given increasing governmental appetite for tax and transparency, collecting taxes and providing information to governments will be the asset manager's new normal.

We conducted a survey of 30 global asset managers to ask about the following:

  • The types of strategic policies they have in place for operational taxes.
  • The way in which operational tax risk is managed and controlled.
  • The availability of resources.
  • The use of technology to manage operational tax risk.

And the results show:



... of the industry has no strategic policy to manage operational taxes.



... of the industry suggests that it has no operational tax risk controls.




...of the industry has no operational tax resource.



... consider technology will be important in managing operational tax risks.


We found that the majority of managers are adopting a reactive, ad hoc approach rather than a strategic controls based approach to managing operational tax risks. This fragmented approach will increasingly become a problem for asset managers who will come under more operational and cost pressures as new financial transaction taxes emerge and tax information reporting regimes begin to take shape.