Taxand flags ‘well-founded’ concerns over increased tax transparency

The current furore over the tax arrangements of some large multinationals is unlikely to calm down anytime soon, and CFOs now need to “firmly add reputational considerations” to their approach to tax issues, according to a leading consultancy.

Three-quarters of tax and finance directors responding to a Taxand survey said they were concerned about the potential exposure of tax planning information needed to meet new country-by-country reporting requirements. “This concern, no doubt, is related both to the potential for competitors to gain insights into one’s corporate strategy through such information, but also to the potential for misunderstanding or misinterpretation of this information to confirm previously held erroneous beliefs,” the firm said in its 2016 global survey ( …

Public CbC reports would bring scrutiny from a range of stakeholders with varying levels of technical understanding, Tim Law of London-based Engaged Consulting, who advises multinationals on tax governance and transparency, told Tax Analysts. “There are significant underlying complexities in the tax affairs of multinationals. However, it is easy for any claim that this information is too complex to understand to appear patronising.”

“The truth is, it’s complex,” Law added. “For example, the tax in any one year may reflect current-year profits, capital allowances, brought-forward tax losses, prior-year adjustments etc. Businesses need to be aware of the way their data might be perceived by someone not party to all these factors.”

Read more: My news story for Tax Analysts, December 16 (paywall).