Accountants Call For Greater UK Tax Transparency
09 May 2013
Posted by: Author: Robert Lee
Source: Robert Lee (Tax-News.com, London)
There is a growing divide between companies' legal reporting obligations and public expectation, Ernst & Young's UK head of tax has warned.
Commenting on the accountancy firm's new "Tax Transparency Seizing the Initiative" report, John Dixon said: "Lack of tax transparency has become firmly linked in the public's mind with aggressive tax planning." He believes that the UK has now "reached a tipping point and organizations can no longer ignore the calls for greater disclosure."
The report reveals that just one in five of the FTSE 100 companies describe their tax strategy in their annual report and accounts. Only one in six specifically state that they use no artificial or aggressive tax structures.
Existing accounting standards require the disclosure of the amounts payable or recoverable in tax at the balance sheet date. According to Ernst & Young, many organizations are concerned that plans for country by country reporting of tax payments would little improve understanding of their tax affairs. It would on the other hand create an additional administrative burden and risk the misinterpretation of commercially sensitive information. 70% of UK tax professionals surveyed were against the adoption of such standards.
As Dixon points out, "The concept of tax transparency will mean different things for different organizations." This rules out a "one size fits all" approach.
However, he is convinced that: "Greater transparency provides an opportunity for companies to tell their stakeholders, from their customers, to politicians and shareholders, about their tax policies and their contribution to the economies in which they operate."
Ernst & Young is accordingly advising its clients "to embrace the issue proactively, rather than waiting for legislation to be imposed." The report recommends that organizations "recognize that now is the time to review the position with respect to additional reporting [and] review how they measure against their peer group and consider where they want to be." They should also "decide where is the most appropriate place to communicate" relevant information, and "design the processes to collate suitable information and supporting data."
"By seizing the initiative now, organizations can help shape a workable outcome and start to rebuild the public's trust in UK business,” Dixon concludes.