October 2 2014 Latest news:
Wednesday, January 23, 2013
THE debate about corporates and high income earners paying their fair share is now one of the most prominent areas in tax, with tax payments being scrutinised by governments, the general public and, to a very great extent, the media.
Reputation management has always been a very important issue for most businesses, but if there’s one legacy that the global recession has left, it’s a call from investors, consumers and the media for greater transparency around how businesses are being managed and conduct their affairs, and what their approach to tax is.
Rightly or wrongly, some household corporate names have been denounced in the media and by some politicians as poor citizens because of the tax strategies they may have employed for years or simply as a result of the amount of tax they are paying. But in this new age of austerity and transparency, businesses of all sizes are coming under the microscope.
Tax has never been a more important agenda item for management, business owners and high income earners and businesses need to understand and be ready to discuss their tax affairs or approach to tax with their stakeholders to prepare for increased public scrutiny on tax.
All of these issues have resulted in a more demanding environment for tax specialists. Regulatory change, in particular, is having significant unforeseen impacts for tax, reflecting governments’ tightening up of their domestic legislation to reduce avoidance, especially as national budgets are squeezed and treasuries look to maximise tax takes.
All of these developments mean that tax is an increasingly challenging element of corporate strategy and highlight the need for businesses to be prepared to answer questions about tax payments, corporate structures and policy.
In particular, companies should ideally:
: : Have a significant understanding of the detail of their tax affairs;
: : Understand what peers are paying (benchmarking against sector and wider industry);
: : Know if their tax policy is aligned to their brand strategy;
: : Be able to articulate the wider economic benefit delivered by their business to the communities in which they operate; and
: : Ensure that all tax structures employed are fully consistent with brand strategy.
Tax is no longer just a legal issue, but a political and reputational one too, and one which businesses must attempt to embrace, albeit highly subjective.
Being on the front foot in respect of such tax matters is fast becoming a necessity.
: : Stuart Wilkinson is head of tax at KPMG in East Anglia.