Businesses lax on tax transparency – EY

BY Richard Summerfield

In the face of increased regulatory pressure from the OECD, the European Commission and various national governments, tax transparency is becoming an extremely important issue. However, many companies lack the systems and resources to adequately respond to these new global tax disclosure and transparency requirements, according to a report from EY.

The report, ‘A new mountain to climb: tax reputation risk, growing transparency demands and the importance of data readiness’, surveyed 962 tax and finance executives across 27 distinct jurisdictions. It found that more than two-thirds of those surveyed believe that they would require additional resources to gather and provide the information required following the introduction of the OECD's base erosion and profit shifting project, and increasing government clampdowns on tax avoidance.

Though many of those firms surveyed believe that they are unable to meet their tax transparency obligations, interest in tax transparency in the corporate boardroom has never been higher.

According to EY, 83 percent of executives surveyed said they regularly brief the chief executive or chief financial officer on issues of tax reputation risk. Forty-three percent of executives regularly brief their audit committee. And 89 percent said they are somewhat or significantly concerned about media coverage as to how much companies pay in taxes.

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

If companies hope to achieve compliance, internal tax professionals may need to change the way they report, track information related to the taxes they pay, and realign their IT systems accordingly.

Report: Businesses must augment tax transparency readiness to mitigate increasing reputation risk

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