FTSE 100 Companies Go Beyond Tax Transparency Requirements: PwC

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By Ben Stupples

More than a third of FTSE 100 businesses are surpassing tax disclosure requirements, highlighting significant attitude changes over the past five years toward financial data transparency.

In 2017, 41 companies listed on the U.K.’s benchmark index went beyond tax transparency reporting requirements, according to a June 8 report from PwC. The extra information includes comments on reputational issues, and the connection between tax and a company’s business model, the report said.

“There is a well-understood issue around trust in the taxes that some businesses pay,” PwC partner Andrew Packman told Bloomberg Tax June 7. Companies that have been more transparent about their taxes “would say they’ve benefited from having a coherent approach on tax they can refer to.”

Legal changes during 2017 forced the largest U.K.-listed companies to focus on public disclosures around their tax affairs. More than 30 FTSE 100 companies disclosed the immediate financial impact of U.S. tax reform, signed into law last December, according to data compiled by Bloomberg Tax.

In addition, large businesses active in the U.K. had to publish a local tax strategy for their 2017 financial year. The aim of the legislation, introduced in the U.K.’s 2016 Finance Act, was to “get tax into the boardroom” of multinational businesses, a senior government official said in November 2017.

“Tax is complex and hard for the public to understand, but you’re seeing multinational companies explain issues like their transfer pricing,” Janet Kerr, a senior tax analyst at PwC, told Bloomberg Tax June 7. “Over time, doing so will go towards helping people understand tax and the debate around it.”

Fifth-Annual Report

PwC’s findings come as part of its fifth annual report on the tax transparency of FTSE 100 companies.

In 2014, just 49 companies listed during that period on the stock index discussed their approach to tax in their annual reports. For 2017, that statistic almost doubled to a total of 95 businesses.

“There’s been a significant shift in attitudes over the years,” Packman said. “And tax and corporation profits aren’t going to go away. Unless people have a better understanding of tax there will continue to be an undertone of suspicion that somehow companies aren’t paying enough of it,” he added.

Tax transparency formed a key part of an OECD project, launched in 2013, to re-write tax policy for global businesses. Making companies file global tax reports on their worldwide activity has been the project’s most widely adopted policy, giving countries unprecedented levels of financial data.

These company filings, known as country-by-country reports, are currently private by law. In September 2016, though, the U.K. became the first country to legislate for public country-by-country reporting.

In its departmental report for 2018, the U.K.’s tax authority said it will review international rules for country-by-country reporting and “consider the case” for making them publicly available.

Companies’ Stance

Before the U.K. tax authority’s comments last December, though, some FTSE 100 companies had already outlined their stance towards the public disclosure of their country-by-country reports.

In July 2017, household goods manufacturer Reckitt Benckiser Group PLC called on governments to “take the necessary steps to accelerate” public country-by-country reporting. Five months later, telecommunications company Vodafone Group Plc’s tax director said the company will publish its report due to fears it would be leaked anyway.

“Executives are very attuned to the broader political environment in which they operate,” Packman said. “Tax forms an important part of how they interact with the public.”

To contact the reporter on this story: Ben Stupples in London at bstupples@bloombergtax.com

To contact the editor responsible for this story: Penny Sukhraj at psukhraj@bloombergtax.com

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