CBI urges 'responsible tax planning'

Companies should be responsible with their tax planning arrangements, a leading organisation has claimed.

The Confederation of British Industry (CBI) - which represents over 240,000 businesses across the UK - has published a statement of principles and strongly advised companies to adopt them.

Central to the advice is a call for firms to embrace narrative reporting - which covers the non-financial information included in annual reports - as this helps businesses develop a meaningful picture of how they are performing.

John Cridland, CBI director-general, said: "UK businesses make a huge tax contribution to the UK economy, paying £161 billion this year - almost a third of total tax receipts. But companies need to do a better job of explaining their tax affairs to the public.

"We are encouraging all companies to explain why they pay what they do in a straightforward and accessible narrative, ideally on their website."

The CBI is also working with the OECD to bring tax rules up to date, as the organisation feels world policy has failed to keep pace with globalisation. On top of this, the body has pledged its support for the automatic exchange of information and Beneficial Ownership.

Part of the overhaul of tax practices could see a greater focus placed on transparency, as a study by Ernst & Young found only 20 per cent of the FTSE 100 describe their tax strategy in annual reports.

According to John Dixon, head of tax at the company, UK businesses need to listen to the public and respond to their calls for greater tax disclosure. He added the recent debate about taxation has led to people developing a healthy appetite for more information.

If companies want to be avoid being pigeonholed as a tax avoider through aggressive planning, they will have to come clean with the details of their arrangements at the moment.

However, 70 per cent of tax professionals are against country by country reporting despite the fact the EU is planning to introduce the measures for banking entities.