A review of the tax disclosures in the FTSE100 reveals an increase in tax transparency over the last 6 years, with some leaders dedicating time and energy to developing voluntary disclosures to inform the debate on tax transparency and improve understanding.
Read our flyers below for insights into the evolving tax transparency debate and to review extracts from leading companies.
Which framework should I follow?
There is increasing scrutiny of tax from a range of stakeholders and many companies are considering their disclosures with some asking “which tax transparency principles should I follow?” There are a number of tax transparency frameworks proposed by different stakeholders but is this the right question? In our view, companies should be asking “who is reading my disclosures, what do they want to know and what do I want to tell them?”.
Is anyone reading published tax strategies?
All companies should have now published a tax strategy if required to do so and we have seen a range of approaches. In the FTSE100 the average tax strategy was 600 words long, ranging from 100 to 2,500 words. Many were global strategies, with reference to tax governance frameworks and in some cases, providing voluntary disclosures to enhance reputation and to build trust with stakeholders.
What are the latest developments?
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 80 countries have passed legislation requiring companies to disclose this information privately to tax authorities. There are proposals in the EU and with the GRI (Global Reporting Initiative) for public CbCR with a small number of companies making a voluntary disclosure of CbCR data.
Which disclosures could add value to your business?
Tax is a complex topic. Mandatory disclosures prepared under international financial reporting standards do not always provide a clear picture of a company's tax affairs for a non expert reader. 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.
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.
Total Tax Contribution and Tax Transparency leader, PwC United Kingdom
Tel: +44 (0)771 266 64 41
Senior Manager, PwC United Kingdom
Tel: +44 (0)7841 781417