Following an internal review, management were unable to fully establish whether all relevant premium taxes had been correctly calculated; furthermore, internal evidence proved insufficient to conclusively prove what premium taxes due had been settled with the appropriate tax authorities.
Internal calculations initially estimated GFSI’s premium tax ‘time-bomb’ at several million US $. GFSI needed a swift resolution.
Upon discovery of the issue, GFSI had to make significant financial provisions for the estimated unpaid premium taxes that were payable.
In addition, provisions had to be made for the cost of settling the premium taxes due, which included professional fees, penalties and fines, which were likely to be imposed by local tax authorities.
Mindful of protecting a market leading reputation, GFSI wanted this issue dealt with promptly, professionally and discreetly, to minimise any negative impact.
GFSI decided to engage FiscalReps to perform a detailed review of company insurance policies. The review’s purpose was to establish the correct amount of premium taxes that should have been paid.
Secondly, a thorough reconciliation was performed to identify which premium taxes remained unpaid.
FiscalReps approached the relevant tax authorities and agreed a full and final settlement of the unpaid premium taxes.
Vitally, FiscalReps also developed a series of internal controls which could be adopted by GFSI to ensure the company’s premium tax position remained fully compliant in future.
GFSI was able to save money by reducing the overall unpaid tax provision and settling the remaining premium taxes quickly and efficiently, with minimal penalties incurred.
Following the FiscalReps review, the estimate of total unpaid premium taxes was reduced by nearly US $2m, a considerable tax saving from the original estimate.
At the time of the engagement, GFSI was undergoing a number of important strategic and structural changes. The use of FiscalReps allowed management to remain focused on core business issues at this time. Crucially, the FiscalReps team were able to resolve the premium tax issue without GFSI suffering any reputational damage.
The overall cost of the exercise to GFSI, including settlement of all premium taxes, penalties, interest and professional fees was approximately 20% less than the original estimate of unpaid premium taxes.