Stakeholders may not benefit from greater tax disclosure: Ernst & Young
09 May 2013
Disclosure of the tax affairs of large corporate in greater depth may not deliver greater understanding to stakeholders, says a report by Ernst & Young.
According to the firm, claims that introduction of measures such as country-by-country reporting could rather end up producing a potentially significant administrative burden and causing businesses to "divulge commercially sensitive information" reports Accountancy Age.
The report goes on to say that businesses, though, could hardly afford to ignore the tax transparency lobby and various activist groups urging the government and the G20 to impose tougher rules on multinationals to force them to report their financial activity separately for each country in which they operate, aimed at exposing aggressive tax schemes used by them.
Typically, companies used transfer pricing for driving down tax costs, which saw the value of goods and services of transnational businesses moving across international borders from one group entity to another.
E&Y's managing partner for tax in UK and Ireland John Dixon ssaid that by "seizing the initiative now", businesses could "positively inform and influence the debate", while failing to "at least consider greater disclosure" would raise concerns.
It was reported last week that E&Y would face questions over its audit work with Google, following the UK Parliamentary Public Accounts Committee announcing it wished to further scrutinise the tax affairs of the search engine company (See: UK parliamentary committee to quiz Google again over UK sales).
Google's vice president for northern and central Europe Matt Brittin had told the committee earlier in November that no sales are made in UK offices, and instead sales to the UK were made from its office in Dublin, Ireland.
Meanwhile, the Confederation of British Industry, said UK businesses should only engage in reasonable tax planning that was aligned with commercial and economic activity and did not lead to an abusive result according to another report in the Accountancy Age.
The call is among a set of core principles released by the confederation as businesses sought to regain the initiative in the tax transparency debate.
Included in the document's 14-points are methods for the enhancement of co-operation, trust and confidence between HM Revenue & Customs and business; promoting efficient working of the tax system to fund public services and sustainable growth.
While the CBI appeared less concerned about business's image, it insisted companies needed to be clearer about their tax bills.
According to director-general John Cridland, UK businesses made a huge tax contribution to the UK economy, paying £161 billion this year - almost a third of total tax receipts. However, companies needed to do a better job of explaining their tax affairs to the public.
He added the CBI was encouraging all companies to explain why they paid what they did in a straight-forward and accessible narrative, ideally on their website.