You’ve published your tax strategy – what next?

01 May 2018

Tax strategy blog

December 2017 saw many companies publish their tax strategy, as regulations came into force requiring large companies to produce a public tax strategy for accounting periods starting after 15 September 2016. The majority of the FTSE100 have now published their tax strategy. With continuing public and media interest in companies’ tax affairs, many companies will want to understand how their tax strategy compares to others.

Our review found a range of disclosures in the FTSE100.  While the length was on average nearly 600 words, this ranged from around 100 words to over 2,500.  There is a clear spectrum of approaches, with the more extensive documents covering areas as diverse as transfer pricing and low tax jurisdictions, and giving much greater insight into how, in practice, the strategy is implemented.  

The word cloud above gives some insight into the content of FTSE100 public tax strategy statements, where the size of the word indicates its frequency.  The most common words are unsurprisingly those in areas required by the legislation: risk, authorities, management, compliance and governance. Also prominent are words such as board, audit committee, planning and transactions.  

The discussion concerning the involvement of the board and audit committee in a company’s tax affairs is insightful when reviewed in detail. The narrative on governance over tax at a senior level indicates a range of approaches to the practical application of an organisation’s tax strategy and importantly, how groups monitor its success.  References to specific frameworks and the review of controls, although less frequent, provides the comfort that the strategy is supported by operational practice and strong systems of internal governance and control.

A smaller number of companies are talking about stakeholders, value and responsibility. Acknowledging different stakeholder interest in tax is key to determining your strategic response to tax transparency – ‘transparency to whom and for what purpose?’  Some companies are clearly going beyond a statement of compliance with tax legislation to discussing tax in the context of wider functions within the business, or tax as corporate responsibility issue.

Now that your tax strategy has been published, are you confident that it will be successfully implemented in the UK and perhaps in other jurisdictions? How will it be interpreted by different stakeholders in the context of other publicly available data and would additional voluntary tax disclosure add value?  

For more information please contact Janet Kerr.

 

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