What is a responsible tax strategy?

As the importance of corporate social responsibility moves up the corporate agenda, the question is, how do you create a responsible tax strategy? Here are some areas to think about when considering this subject.

Board endorsement

Have you got Board endorsement for your tax strategy? “Tax has definitely moved up the corporate risk agenda;” says Susan Symons, tax partner, “and HM Revenue & Customs are looking for contact at Board level. Due to the changing environment, now is the time to look again at what tax planning is acceptable for your organisation and to get this agreed at the highest level. A number of my clients are in agreement that there's a real need for stronger corporate governance in this area.”

Linking up

Do you know how your tax strategy relates to your business ethics and/or policies on corporate responsibility? A link can legitimately be made between paying tax and corporate responsibility. You may have high ethical standards around the way you do business, but have you thought through a comparable stance on tax matters?

Risky business?

“In today’s market place,” says Tony Elgood, tax risk management partner, “managing tax risk has become increasingly important. Under the responsible tax strategy heading, reputational risk is perhaps the most important tax risk which needs managing. Are you prepared to take tax risks, both on the planning side but also in compliance matters, which could either end up in the Courts or on the front page of the newspapers? What is your policy in this area - and how do you make sure that the results of the actions taken inside your business match up with your agreed policy?"

Managing external stakeholders

“Have you considered which stakeholders may be interested in your tax position and how far you need to take their views into account?” asks Susan Symons, tax partner. “What are their viewpoints, and are you considering how to engage with them? Do you need to redress the balance between short term, tangible, financial benefit to shareholders and the longer term more intangible benefit of reputation with key groups of stakeholders?”

Transparency

Have you considered the benefits of greater transparency about what taxes you’re paying and your approach to tax and tax policies? In the US, organisations undertaking certain types of tax planning are banned from bidding for government contracts. Taking this case as an example, are you in a position to disclose all your tax planning activities should this be called for? Have you considered proactively disclosing your real contribution in taxes? The PricewaterhouseCoopers Total Tax Contribution framework can help you collect this information.

Making your views known

There needs to be an active dialogue with the UK Government and HMRC over the development of the tax system. "Deciding to get involved in consultations and general representations is certainly a valid part of a responsible tax strategy;" says John Whiting, tax partner. "Companies should commit to making sure their views are heard, either directly, through industry bodies or via their advisers. Many clients are telling us that they feel a distinct lack of guidance from HMRC in important areas.”

For further information please contact Susan Symons on +44 (0) 20 7804 6744.