Time to act on tax transparency
Wednesday 29 May 2013 — Companies need to act now to manage the impact of increased tax disclosure requirements EY said today following the introduction by the Federal Government of legislation to increase the transparency of the corporate tax system.
EY Tax Partner Glenn Williams said companies should consider a fuller voluntary explanation of their tax profile to combat any misconceptions which may be drawn from the limited mandatory disclosure which will be made by the ATO.
“Increased tax transparency is inevitable and the time for companies to act is now,” Mr Williams said.
“To ignore this pressure is to risk ongoing reputational and brand damage.”
The Government move will require companies’ with income in excess of $100m (and certain others in the resources sector) to publicly disclose their Australian income, taxable income and tax payable commencing for the 2013-14 financial year.
Mr Williams said that public and political debate is increasingly focused on the tax policies of companies as well as the amount of tax that they contribute.
“There is growing pressure on organisations to be more transparent in disclosing where they pay tax and how much they pay,” he said.
“This type of reporting of tax in the public domain seems to be here to stay. Companies need to recognise that this will become part of their ongoing tax reporting obligations.”
There is a growing divide between companies’ legal reporting obligations and the public and political expectations. The EY ‘Tax Transparency Seizing the Initiative’ report released earlier this month showed that just one in five of the UK FTSE 100 describes their tax profile in their annual report and accounts.
“The report is relevant to Australian companies as it set out a number of approaches that organisations can take,” Mr Williams said.
“It highlights some disclosures that could be made and different ways to make them. There is no one size fits all approach.
“We are already working with a number of clients to help them prepare for greater disclosure requirements.
“Companies that do not act may face pressure from the media, stock market analysts and some shareholders to explain what may not be apparent from the mandatory disclosures.
“It is important that companies protect their reputation by demonstrating compliance with tax reporting and tax payment obligations.”
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