The tax transparency debate is evolving. Large companies in the UK must now make a public statement of their approach to tax and a private disclosure to tax authorities of their tax payments on a country-by-country basis. But can this increased disclosure help to rebuild the trust in big business that has been lost in recent years? Tax is not an easy subject and conveying complex messages in a simple way is difficult. Thoughtful voluntary tax disclosures can help to explain and inform the narrative around the taxation of large companies. Our latest review of tax disclosures in the FTSE 100 shows that we are seeing increased voluntary tax disclosures from some large companies and this will go some way to helping to inform the evolving tax transparency debate.
A review of the tax disclosures in the FTSE100 reveals an increase in tax transparency over the last 5 years, with some leaders dedicating time and energy to developing voluntary disclosures to inform the debate on tax transparency and improve understanding.
Please see the publications below for further details.
The world is changing and today’s tax professional must face both increased uncertainty and scrutiny. The belief that globalisation has benefited large companies and not the population at large may have contributed to the rise of populism and the lack of trust in big business. There is a perception that large companies are not paying their ‘fair share of tax’ and some believe there is a need to explain complex and nuanced tax affairs in an understandable way to change that perception.
There has been growing recognition of the importance of engaging with stakeholders in all areas of reporting.
The 2018 UK Corporate Governance Code and the new reporting regulations in s172 of the Companies Act have a focus on stakeholders. These new provisions are not specifically directed at tax, but tax reporting teams should understand how tax is linked to the company’s broader stakeholder agenda.
The Financial Secretary to the Treasury at that time acknowledged the increasing number of UK businesses making a public statement about their approach to tax and also referred to a small number of businesses ‘persistently engaging in tax avoidance or highly aggressive tax planning, and not engaging with HMRC’. The legislation was introduced as an attempt to ‘level the playing field for all’.
CbCR is a term that is used broadly, but in simple terms it means reporting on certain financial information on a country basis instead of a global basis. Under OECD BEPS Action 13, over 70 countries have passed legislation requiring companies to disclose this informationprivately to tax authorities.
Tax can be complex and some companies are making voluntary disclosures to provide a better understanding of their tax affairs, recognising always that there must be a business case for voluntary tax disclosures
Total Tax Contribution and Tax Transparency leader, PwC United Kingdom
Tel: +44 (0)189 552 2104
Senior Manager, PwC United Kingdom
Tel: +44 (0)7841 781417