Speaker 1: The fourth step in the journey towards full control is aligning governance and operational conduct. Assigning clear roles and responsibilities to employees in charge of data filings increases ownership and accountability within your team. Without clear governance roles to support the control of company operations, it can be difficult for your company to defend itself in a potential dispute. When allocating high income to an entity, it is not enough to show personnel on that entity's payroll carrying out stated tasks. You should also prove that there are significant personnel controlling the functioning of these tasks. To achieve this, apply RACI. In tax and transfer pricing, roles such as risk strategy development, risk management, tax or TP documentation preparation, and so on, can be allocated to different team members, allowing your company to maintain clear accountability and providing protection in case of a dispute. Without this, your position could be weaker. Consider Apple, whose tax structure shows a distribution of roles, responsibilities, and corresponding income between related and unrelated entities that's different than those on Apple's value chain. In the following case, Apple artificially shifted income outside of the USA to its Irish subsidiaries, including three with no tax residency in any nation. One subsidiary had no employees and reported $30 billion in net income for 2009 to 2012, while filing no corporate tax return and paying no income taxes to any government during these years.

Speaker 2: I'd like to explain to the subcommittee very clearly how we view our responsibility with respect to taxes. Apple has real operations in real places with Apple employees selling real products to real customers. We pay all the taxes we owe, every single dollar. We not only comply with the laws, but we comply with the spirit of the laws. We don't depend on tax gimmicks. We don't move intellectual property offshore and use it to sell our products back to the United States to avoid taxes. We don't stash money on some Caribbean island. We don't move our money from our foreign subsidiaries to fund our US business in order to skirt the repatriation tax.

Speaker 1: Tim Cook's spirited defense in this video might sound like a convincing story, but without any evidence of real operational conduct and governance structures, it remains just that, a story. Not long after this hearing and an investigation by the EU, Apple's deal with the Irish government was judged as legal state aid, and they've been ordered to pay back US$15 billion in taxes. To assess whether you're in control of your operations, ask yourself the following. Do you have clear, well-documented, and implemented reporting lines across your organization? Are there many differences between your governance model and the reporting lines for running your operational business? Is RACI implemented in your operational and tax department setup? If you're lacking in any of these areas, remember to be responsible, accountable, consulted, and informed.