CBI Makes Case For Corporate Tax Transparency
13 May 2013
Posted by: Author: Robert Lee
Source: Robert Lee (Tax-News.com, London)
The Confederation of British Industry (CBI) has detailed the principles it believes companies should adopt to improve transparency and public understanding of their tax affairs.
The CBI's statement sets out seven tax planning principles it argues will encourage more responsible tax management. It strongly recommends that they are followed by British businesses and all companies operating in the UK.
John Cridland, CBI Director-General, explained: "UK businesses make a huge tax contribution to the UK economy, paying GBP161bn (USD250bn) this year - almost a third of total tax receipts. But companies need to do a better job of explaining their tax affairs to the public. We are encouraging all companies to explain why they pay what they do in a straight-forward and accessible narrative, ideally on their website."
First on the CBI's list is the assertion that UK businesses should only engage in responsible tax planning. This should be aligned with commercial and economic activity, and not lead to an abusive result. Similarly, UK businesses are urged to interpret tax laws in a "reasonable" fashion, consistent with fostering a relationship of "co-operative compliance" with HM Revenue and Customs (HMRC), and respond to tax incentives and exemptions. They should be open with HMRC about their tax affairs, and work collaboratively to reach an early agreement on any dispute.
At an international level, UK businesses are encouraged to follow the terms of relevant double tax agreements (DTAs), along with the Organization for Economic Co-operation and Development's guidelines for dealing with transfer pricing and establishing a taxable presence. They should also engage "constructively" in international dialogue on the review of global tax rules.
Finally, and perhaps most importantly, given the ongoing dialogue on tax evasion in the British press, firms should seek to increase public understanding of and trust in the tax system. To this end, the CBI contends that organizations should consider how best to explain more fully their economic contribution and the taxes they pay in the UK. It suggests that businesses explain their policy for tax management, and how they reach tax decisions, and perhaps publish details of the amount and type of taxes paid.