Why is Transparency Important?

Transparency in tax

Source: Daily Mail

 

In a period of both fiscal deficits and changes in the world economy, the amount of tax paid is a political issue. Tax is no longer for tax geeks, it is front page news. Business has to be more transparent and more able to explain its tax planning. Low effective tax rates are under scrutiny from politicians and beginning to be questioned by markets.

Transparency in tax is no longer an option.”

Transparency is not just about reporting the amount of tax paid, but being able to explain it to politicians and society.

Any major business needs to review its tax planning strategies and assess their sustainability and its willingness to be front page or TV news. Through my work in developing the Rio Tinto taxes paid report and EITI reporting, I have worked through a number of the issues which corporates need to consider as they become more transparent. I chaired the OECD group which considered the issues of Country by Country reporting.

Transparency is no longer an if question, but one of when. Business needs to think through the issues.

Country by Country Reporting

Tax Paid by International Companies
I have been involved with Country by Country reporting since the inception of the Extractive Industries Transparency Initiative in 2002.

I developed the CbC reporting for Rio Tinto from 2004 which is now recognised as being at the forefront in this field.

I was business lead on the work leading to the Centre for Business Taxation paper on the subject in 2011 and the OECD review within the Taskforce for Tax and Development.

All businesses need this information to underpin their risk assessment framework and to develop the presentation of their tax policies in public.

The current European Commission proposals illustrate that this issue will not go away, it has to be addressed.