Tax Transparency: to whom and for what purpose?

28 November 2016

Corporate reporting in the UK is moving towards greater transparency (the Gender Pay Gap, the Modern Slavery Act) and the march towards greater tax transparency has not slowed this year.

In the 10 or so years that I’ve been working in the area of tax transparency, the change to the tax landscape has been incredible.  Six companies in the FTSE100 now publish a separate report on their tax affairs in the move to enhance stakeholder understanding of tax.

But tax is complex – and can be difficult to explain – so it is sometimes challenging to navigate this changing landscape. 2016 has seen new regulation requiring large companies to publish a tax strategy and the requirement for country-by-country reporting to tax authorities.  But as we’ve talked to companies over the last year, it’s become clear that while some are taking a reactive approach to the new legislation, disclosing the required information, others are developing a proactive, strategic approach to tax transparency in this changing environment.  

Companies are asking ‘Transparency to whom and for what purpose?’  So, “Who are our stakeholders and what do they want to know?, what are we required to disclose? and what additional information would be useful to give the full picture?” The answer may be that no additional disclosure around the company’s tax affairs would add value and it’s important to note that we’re not suggesting that greater transparency is needed from everyone, but that a considered approach, gathering views from around the business, is necessary.

We have reviewed tax disclosures in the FTSE350 and there are a range of responses to this greater scrutiny, but some companies have made innovative disclosures around tax and are helping to move the debate forward.  Our Building Public Trust Awards for Tax reporting, which will be announced on 29 November recognises those companies taking a strategic approach to tax transparency and helping to inform the debate through innovative disclosures.

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