“Not all companies ready for tax transparency”

Tax transparency is becoming the norm, but many companies do not yet have systems or resources in place to meet new requirements, according to a study from accountancy giant EY.

The global drive for transparency is one key outcome of the debate on what constitutes a “fair share” of tax, with the OECD, European Commission and national governments demanding more data from businesses, claims the report, A New Mountain to Climb: Tax Reputation Risk, Growing Transparency Demands and the Importance of Data Readiness.

It goes on to warn firms that tax details reported in one country will most likely be available to administrators in others, particularly in light of the OECD’s base erosion and profit shifting action 13.

Companies need to change the way they report and track their information; they must realign their IT systems to ensure data can be collated easily, the document advises. It sets out the steps to enable transparency readiness and prepare information to manage reputation risk.

Recommendations include monitoring public interest and regulatory developments to understand the likelihood of new disclosure requirements; developing and sustaining the ability to source accurate data, in the right format and in a timely manner; and cultivating insights that allow presentation of a “total tax picture” and to integrate lessons into tax-risk management strategy.

EY’s global vice chair of tax, Jay Nibbe, said, “We are at a critical stage as the global tax environment evolves. Increasing transparency readiness presents an opportunity not only to comply with new disclosure demands, but also to work to mitigate reputation risk.

“Getting prepared requires investment in technology, data extraction capabilities, and new skills in people resources. It also involves increased awareness on how you think about your tax position, and how it could be perceived by a wide range of stakeholders.”

Issue: 4504 / Categories: News , BEPS , OECD , Business , Companies , International