Ernst & Young call for greater tax transparency

UK businesses and financial professionals need to respond to the public demand for greater tax transparency if they are to revive their reputations and ensure they play a role in the country's economic recovery, according to a new report from consultancy firm Ernst & Young.

The study suggested that only 20 per cent of FTSE 100-listed companies describe their tax strategy in their annual report and accounts, despite the ongoing debate over taxation in the wake of the problems experienced by multinationals such as Starbucks over the course of 2013.

John Dixon, tax chief at the business, argued that these events have whetted the public appetite for transparency in how these affairs are carried out - not to mention the political desire to be seen as bringing rogue companies to heel.

A lack of transparency is now firmly linked to aggressive tax avoidance measures in the public eye, whether or not that is actually the case, the Ernst & Young chief explained. This means that we have now reached a "tipping point", in Malcolm Gladwell's coinage, where calls for better levels of disclosure and clarity can no longer be dismissed.

"Greater transparency provides an opportunity for companies to tell their stakeholders, from their customers, to politicians and shareholders, about their tax policies and their contribution to the economies in which they operate," suggested Mr Dixon.

This is not only important because businesses do not want to be the whipping boys of media figures and politicians looking for easy point-scoring, but because improving their public profile is one way of driving up profitability and working towards economic recovery.

Ernst & Young also pointed out that carrying out transparency measures pro-actively, rather than waiting for legislation to be introduced, will add a further patina of virtue to UK firms looking to improve their reputation.