Tax Metrics During my time as an auditor and with my experience in a multinational company, I understood how important is tax. Yesterday, somebody asked me how a Tax department should measure their performance. Here are the top 10 metrics that every CFO and tax team should follow: 1?? Effective Tax Rate (ETR) Average rate at which your company's pre-tax profits are taxed. It can indicate how efficient your tax planning is. 2?? Tax Gap Measures the difference between the taxes that are owed and the taxes that are paid. It's a great way to understand compliance within your organization. 3?? Tax Return Accuracy Percentage of tax returns filed without errors. High accuracy can help you avoid penalties and audits. 4?? Cost of Tax Management This includes all costs associated with managing tax obligations, like personnel, software, and consulting fees. It's all about optimizing costs while maintaining compliance and accuracy. 5?? Time to Close This metric gauges the number of days from the end of a fiscal period to when the tax provision is completed. The shorter the time, the more efficient your tax department is. 6?? Deferred Tax Assets & Liabilities These reflect the future tax impact of transactions your company has already entered into. It's important for understanding future tax obligations and potential benefits. 7?? Tax Savings This metric quantifies the savings achieved through tax planning strategies. It's a clear measure of the success of your tax department's planning and strategy. 8?? Tax Audit Results Always keep track of the outcome of any tax audits, including any fines or penalties. Frequent audits or penalties might be a sign that you need to improve compliance processes. 9?? Unrecognized Tax Benefits These are benefits from tax positions that your company has taken, or expects to take, on a tax return, but they haven't been recognized in the financial statements due to uncertainty. As they are not shown in the Financial statements, it's crucial to keep an eye on them. ?? Tax Risk Exposure This is a measure of potential financial risk related to tax, like potential changes in tax laws or potential issues with transfer pricing. Proactive management of tax-related risks can make you save a lot of money and trouble!