Tax avoidance: Ernst & Young report calls for transparency

Tax files The UK's Big Four accountancy firms have been criticised for helping companies avoid tax

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A leading UK tax expert has warned companies that they can no longer ignore public demands for greater transparency about their tax affairs.

John Dixon, tax chief at Ernst & Young, said mounting concern about avoidance had created a "tipping point".

In Tax Transparency, a report published on Monday, he says that by "seizing the initiative" companies can re-build trust - and so avoid mandatory changes.

The big accountancy firms have been criticised for helping firms avoid tax.

Mr Dixon was one of the experts from the UK's biggest accountancy firms who faced robust questioning by MPs on the Public Accounts Committee in January.

It followed concern at the way companies such as Amazon, Starbucks and Google were able to reduce their corporate tax liabilities. Anti-avoidance campaigners have begun targeting individual firms and executives, such as Vodafone and Sir Philip Green.

Mr Dixon said in the report: "The public is calling for a clearer picture of the tax policies of organisations, as well as the amount of tax they pay.

"The recent debate around 'fair tax' has raised the bar in terms of the expectations of the level of tax information provided by multinational companies. And the public is waiting for a response."

Start Quote

The benefits of building greater trust with stakeholders will far outweigh the cost and resources needed for greater tax transparency”

End Quote John Dixon Ernst & Young

Multinationals are worried that increased disclosure would create an administrative burden, as well as mean divulging commercially sensitive information - all without necessarily adding to public understanding of the issue.

Mr Dixon said he recognised such concerns, but added: "The direction of travel appears clear and we see the current position as a tipping point.

"Our view is that, if there is not a step change in the level of voluntary tax transparency reporting, there is a material possibility that mandatory changes will follow."

Ernst & Young, which represents some of the UK's biggest firms, said the report is designed to kick-start discussion among corporations and tax experts about what needs to change.

'Greater trust'

The report makes few specific recommendations, but highlights the country-by-country tax disclosure required of many mining companies and says firms could start by providing far clearer information in financial statements.

Mr Dixon said: "We are not in favour of a one size fits all approach. The concept of tax transparency will mean different things for different organisations.

"Companies will need to form their own views on additional voluntary disclosure and how to get their messages across appropriately. But we are confident that the benefits of building greater trust with stakeholders will far outweigh the cost and resources needed for greater tax transparency."

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