1. CONTENT
1. Why Tax risk & Scenario Analysis?
2. Examples of deliverables
3. The offering
4. The Price
2. 1. WHY VALUATION OF TAX RISK AND REWARD?
• Companies face many tax uncertainties and risks when making business decisions, e.g.
– in tax litigation: should we litigate or settle in disputes with the tax authorities?
– in mergers and acquisitions: is there a reasonable balance between tax risks and
the price or guarantees?
– in investment decisions: do we adeaquately price the tax risks into the business
case?
– in tax planning and structuring: do the tax benefits of planning and structuring
outweigh the tax risks?
– in discussions with the Non Executive Board: do we give relevant and efficient
insight in the company’s tax risks, without digging into unnecessary and time
consuming detail?
– in strategy development: do we adequately calculate with the tax risks and rewards
of our strategy?
– in the annual accounts: how do we adequately value the tax risks in our accounts,
without releasing confidential information?
• For all these questions, VMW Taxand offers Tax Risk & Scenario Analysis, a service that
provides companies with expected value calculations, tax risk valuation,
3. 1. WHY VALUATION OF TAX RISK AND REWARD?
• This document provides three examples of Taxand project deliverables, i.e.
– Example 1: Litigation support. The valuation of the uncertain outcomes of a court
trial, enabling the comparison between settlement and litigation
– Example 2: Structuring support. The valuation of uncertain taxes in a structured
finance transaction.
– Example 3: Transaction support. The valuation of uncertain taxes in two alternative
ways to structure the acquisition of a target company.
14. THE OFFERING
• Taxand will work with your tax advisor (internal counsel, Taxand advisor or third party) to
establish the factual and technical background of the position to be valued. Information is
gathered through file review and/or a joint session or conference call.
• The information will form the basis for a scenario analysis in which Taxand, together with the
tax advisor, will establish the key variables driving the risks and rewards of the position to be
valued.
• Taxand will then analyse and model the scenarios and their outcomes with decision table
modeling techniques and financial modeling techniques.
• In co-operation with your tax advisor, Taxand will estimate the likelihood of the various
scenarios and will return the overall confidence level of risks and rewards.
• Taxand will quantify the risks and rewards, and - where relevant – will visualise the results in
easy-to-read and easy-to-compare graphs, e.g.i a risk distribution histogram, waterfall graph,
or tornado sensitivity chart.
15. THE PRICING
• Fees are based on >me value and dependent on the level of accuracy of the valua>on.
• Taxand will maximise the efficiency of the valua>on by regulary performing sensi>vity analyses that
avoid unnecessary modeling.
• Taxand will always give a fee quote.
• Taxand is oPen able to provide a relevant and insighQul valua>on for €12,500 ($20,000) per
posi>on, if the posi>on has already been tax technically analysed, has a single year effect and does
involve no more than 16 scenarios (as many posi>ons do). A simple mul> year scenario analysis
normally cost no more than €17,500.
• To get a feel for the pricing: the fee for the valua>on in Example 1 was €17,500, and for Example 2
€12,500 for the overall analysis and €4,500 for each extra posi>on, so totalling 1 x €12,500 + 2 x €
4,500 = €21,500.
• However, complex posi>ons with mul> year correlated variables may require comlex decision table
and financial and Monte Carlo simula>on modeling, which may require more >me and effort and
thus substan>ally higher fees. Taxand will advise you in advance about the need and expected
return of such modeling.
